Deutsche Bank on selling USD/JPY
The USD/JPY rebounded to 106 and cleared out hedge-selling orders by Japanese export companies at the 105 level. This shift modestly widened yen depreciation leeway and is likely to curtail worries about strong-yen risk for the time being. We expect conditions that favor hawkish Fed comments owing to removal of the initial Brexit shock and firmness in US indicators. There is also talk about the BoJ adopting helicopter money policy at the monetary policy meeting on 28-29 July.
However, unwinding of speculative yen longs and yen selling related to the corporate acquisition that fueled the recent USD/JPY rebound are temporary factors. Export firms mainly have selling orders at the 110 level, and we think Japanese hedgers will continue to put a cap on upward movements.
We advise short-term investors and Japanese hedgers to steadily build shorts while the USD/JPY stays above 105.
Our forecasts for the USD/JPY are 97 at end-September and 94 at end-December.
For bank trade ideas, check out eFX Plus.
