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USD/JPY drops with stocks – TD Securities

FXStreet (Barcelona) - The TD Securities Research Team note that weak growth worries may be spilling over into stocks where the plunge in European stocks has pulled N225 futures sharply lower, weighing on USDJPY after the USD traded nearly up to 119 overnight.

Key Quotes

“USDJPY looks over-valued relative to equity markets and spreads (our FV regression of USDJPY based on the Nikkei’s performance suggests and equilibrium rate nearer 112 currently), but recent monetary policy and political developments in Japan have built up a lot of momentum behind the bull move in the USD.”

“We see little scope for a significant pullback at this point. From a longer-term technical point of view, there is little to suggest that the “overshoot” cannot extend towards the 124 area in the next few months.”

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