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Danske Bank provides its view on USD/JPY.
Key Highlights:
1. Recent Movement in USD/JPY: • The USD/JPY pair has experienced an upward trend since the Bank of Japan (BoJ) made policy adjustments a few weeks prior. The currency pair is hovering around the 145 mark. • This upward movement is primarily attributed to rising US yields and an increased oil price.
2. Concerns about Intervention: • The market seems to be hesitant around the 145 level, fearing potential intervention by Japanese authorities. • It’s worth noting that in September 2022, the BoJ, acting on behalf of the government, intervened when the USD/JPY reached the same 145 level.
3. Market Positioning: • Current Commodity Trading Advisor (CTA) positioning data indicates that the market is still short on the Japanese Yen (resulting in a long position on USD/JPY). • Recently, there have been further additions to JPY shorts, which is moving the positioning closer to a region where it’s excessively short.
4. Factors Influencing USD/JPY: • In the short-term, the trajectory of the USD/JPY seems to be influenced predominantly by US yields and energy prices.
5. Recommendation & Outlook: • Danske Bank suggests selling on short-term rallies in the USD/JPY pair. The rationale behind this recommendation is the asymmetric outcome space. If the USD/JPY continues to rise from its current position, there is a possibility of intervention by the Ministry of Finance, likely to stabilize the currency pair within the 145-148 range. • In the longer run, Danske believes that the USD/JPY is fundamentally overpriced.
I dunno, I think the MoF might let it go higher. regardless, check this out: