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Japan: Momentum towards the downside, stay short JPY - BNP Paribas

FXStreet (Delhi) – Research Team at BNP Paribas, suggest that the September BOJ Tankan provides more evidence of a slowing manufacturing sector after the weak July and August IP releases which should be enough to support the USDJPY.

Key Quotes

“The large manufacturers’ diffusion index retreated to 12 from 15 last quarter. Still, this reading is not weak enough to boost expectations for BOJ easing meaningfully. Japan investor outflows again surged for the week of September 25 with foreign bond purchases again above JPY 1 trillion. This should be sufficient to keep USDJPY supported until rising US investor flows guide the pair higher heading into year-end.”

“Furthermore, our newest quant FX product – BNP Paribas FX Momentum – signals that JPY-positive momentum has slowed sharply over recent weeks from a peak of +64 to just +16 this week (see chart). Accordingly, this signal suggests that prospects for JPY appreciation have diminished considerably. We target 124.40 on our long USDJPY recommendation from 119.50.”

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