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FX BANK FORECAST · COVERAGE
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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 38 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 38 institutional desks. No promotion.
The desk views the recent decline in USD/JPY, which has dropped 3.5% on heavy volumes, as a sign of potential intervention by Japanese authorities capitalizing on dollar weakness following the Fed's dovish signals. Per the full note from ing-think, the timing aligns with indications from Fed officials that suggest a pause on rate hikes is possible, particularly after the lower-than-expected US June core PCE data bolstered this outlook. With Japanese authorities possibly targeting intervention levels of around $70 billion, the sustainability of this currency movement hinges on both Fed policy and a hawkish pivot from the Bank of Japan. The broader backdrop points towards a constrained Japanese FX intervention strategy due to finite reserves, which are forecasted to dip below $1 trillion if the recent interventions continue.
The desk contends that the drop in USD/JPY signals intervention from Japanese authorities as they leverage softer dollar conditions. This intervention comes amidst indications from the Fed that hints at a potential halt in rate hikes, which aligns with the shift in sentiment following disappointing inflation data.
The volume of trades on the day of the USD/JPY move suggests significant market activity, reminiscent of the intervention seen in late April. USD/JPY's significant drop of 3.5% on heavy trading volumes—similar to that late April maneuver—indicates the market's strong reaction to these developments.
Our current consensus for USD/JPY is set at 160.2600, with a median target of 155.00 by March 2026. Key targets from notable firms include: - deutschebank: March 2026 target of 153.00 - ubs: March 2026 target of 153.00 - morganstanley: March 2026 target of 150.00
This view exhibits some divergence from the broader consensus, especially since the desk's outlook gestures towards potential further depreciation rather than stabilizing at current levels. Notably, the average target across firms suggests a bearish undertone, as most are set well below the current spot.
Aligned firms like deutschebank and ubs similarly express pessimism about the near-term prospects for USD/JPY. Conversely, firms such as morganstanley maintain a more cautious outlook, suggesting a potential trend reversal may come into play.
Watch for relationships among currency pairs, such as EUR/USD and GBP/USD trends, which could reflect shifts stemming from the BOJ's upcoming policy adjustments. This situation closely ties to broader central bank narratives affecting JPY valuations, so keep an eye on forthcoming monetary policy signals.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
Market implications
Traders should monitor the 160.00 level on USD/JPY for signs of continued intervention or resistance. The Fed's upcoming decision on rate adjustments in September will also be critical as it could dictate the trajectory for further dollar strength or weakness.
Risks to this view
Should the Fed pivot back to a more hawkish stance, or should Japan's economic indicators suggest a robust recovery, USD/JPY could see a sharp reversal. Additionally, a significant increase in Japan's FX reserves or more aggressive intervention tactics could also neutralize bearish trends.
| Firm | Stance | YE 2026 |
|---|---|---|
Rabobank | Bearish | 1.1000 |
ING | Bullish | 1.1300 |
MUFG | Neutral | 1.1200 |
All 31 desk targets for EUR/USD
Older quick take Quick take Published 15:56 FX USD/JPY: Strong suspicion of intervention Japanese authorities appear to have intervened again, taking advantage of post-Fed dollar weakness. USD/JPY has fallen 3.5% on reportedly heavy volumes, similar to late April. The move was well-timed, but a lasting turnaround in USD/JPY will require the Fed not hiking in September and a more hawkish Bank of Japan It looks like Japanese authorities intervened on post-Fed dollar weakness as USD/JPY has fallen 3.5% on heavy volumes Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Chris Turner Global Head of Markets and Regional Head of Research for UK & CEE A well-timed move It very much looks like Japanese authorities have taken advantage of a softer dollar environment to start their second FX intervention campaign of the year.
Recall they sold around $73bn over the period 30 April-1 May. The move looks well-timed in that the dollar was already under pressure after the Fed’s Kevin Warsh yesterday sowed doubts about a September rate hike. And today’s release of a softer-than-expected US June core PCE deflator only added to the softness in US rates and the dollar.
Market reports suggest USD/JPY volumes were huge today and, assuming it is the case, we expect intervention could sum up to around $70bn again over a two-to-three day period. Although a little arcane, there is the issue that the BoJ may need to act in three-day bursts or ‘instances’ of intervention. Any more than three instances of FX intervention over a six-month period could see Japan’s FX regime losing its ‘free floating’ classification under the IMF’s system.
That would be a relegation from the big league. Another limitation is that Japan’s FX reserves are finite and another $70bn or selling will drop them close to $1tr. That is still healthy, but a reminder that intervention is not limitless and needs to be used sparingly.
The intervention will involve the sales of US Treasury securities, which the US Treasury will hope will be from the short end of the curve. Sales of longer-dated tenors would be unwelcome at a time of curve steepening and uncertain Fed tightening. Will intervention work?
USD/JPY sold off over 4% in January when the Fed checked USD/JPY rates. It sold off just over 3% in April in intervention and has sold off a little more today. However, the macro environment needs to change to turn this trend around.
If the ING house call of unchanged Fed rates in September is correct, Japanese authorities have a chance of turning this trend. We’re less convinced that a decisive move lower will be driven by the BoJ hawkishness, unless there is a huge surprise at tomorrow’s BoJ meeting. There is a risk of one or two of the BoJ board voting for back-to-back rate hikes , but we think a turn in USD/JPY really requires the dollar to top out first.
Unless we get some much softer US data to further erode Fed tightening expectations or the BoJ defies the Japanese government with a much more hawkish message, we suspect USD/JPY can grind back above 160 next week. But speculators will be thinking twice now about buying USD/JPY. ING forecasts for USD/JPY: 3Q26 160, 4Q26 158.
Japanese yen Bank of Japan Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Older quick take
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Cable sits 1.09% below the 20-firm median Dec-26 target of 1.35, with a 0.26-point dispersion that reflects sharply divided BoE-vs-Fed rate paths.
USD/JPY trades at 158.51, 1.61% above the 25-firm median Dec-26 target of 156.0, with a 30-figure dispersion signalling deep disagreement on the BoJ-Fed spread path.
EUR/USD spot sits 2.69% below the 31-firm median Dec-26 target of 1.145, with a 0.135 dispersion range signalling deep disagreement on the path ahead.
31 investment banks see EUR/USD at 1.1469 by Dec 2026
View the live EUR/USD forecastStanChart |
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