Goldman Sachs latest on USD/JPY is to “Go tactically short $/JPY on less proactive stimulus in Japan and narrowing rate differentials”
- They believe USD/JPY will ultimately move higher (growing interest rate differentials and more stimulative policies in Japan)
- But, in the near-term, risks have increased for a move that could push USD/JPY lower first
- Sales tax increase to go ahead
- ‘Cushion’ will only partially offset the negative impact
- BOJ meeting unlikely to lead to further stimulus (at least until April 2014)
- Yen short positioning is overstretched
- Uncertainty on the fiscal outlook in the US will keep downside pressure on US rates & prompt the Fed to continue to be easy
- Therefore the near-term risk is lower in USD/JPY
GS recommends short USD/JPY around 97.30, targetting 94.00, stop on close above 98.80
(With thanks for the GS report to – you know who you are)
