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USD/JPY: Neutral view for the week ahead - Westpac

Robert Rennie, Research Analyst at Westpac, suggests that with the end of the month (alarmingly) almost upon us, we have a heavy run of data in Japan next week.

Key Quotes

“This starts with the flash PMI tomorrow, then kicks into gear with retail sales Wednesday, IP Thursday and CPI, jobs and the capex survey next Friday. As ever though, it’s hard to see this impacting much on the ¥ which remains driven by expectations for the US tax plan.”

Bias:

  • Last week we switched back to a neutral stance on the basis that the market appeared to be very long USD/JPY and US$ momentum appeared to have stalled. That shift appeared to be very timely indeed (!) and USD/JPY has since dropped below 111.50.
  • Given the very intense nature of long positions concentrated in USD/JPY, some further weakness clearly remains possible. However, “tax cut hopes have received a boost” and this should help stabilise USD/JPY with time.
  • We stick to neutral view for the week ahead, but a more upbeat view into the end of the year as US data momentum likely supports the US$.”

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