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Japanese Yen Resumes Overnight Weakening Bias

JPY
  • US yields reversing back to unchanged on the session has allowed USDJPY to resume its overnight strengthening trend, with the pair now re-approaching session highs around the 154.00 handle. As noted earlier, the pair has rallied well off the 50-dma - a key support tested last week at 151.99, closely matching the multi-decade pivot level around 151.91-95, which garnered much attention earlier this year.
  • Earlier today, SocGen noted that the recent fall in US yields will be welcome, but this fight isn’t over yet and hinted towards caution in initiating yen longs before the US CPI report on May 15.
  • Furthermore, Goldman Sachs said the success of last week’s apparent intervention is best judged as buying time for the Yen, maintaining that the broader macro environment remains quite negative for the Yen. However, buying time is still valuable, as it reduces the potential for economic disruptions from the exchange rate adjustment and could stabilize the currency until the economic backdrop becomes more supportive for JPY (though, in Goldman’s baseline outlook, this should be limited).
    • GS maintain their forecast of 155, 155 and 150 in 3, 6 and 12 months, and think the risks are skewed to the upside should the Fed cut “later and less.”
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