FX fundamental analysis
JP Morgan, in a research piece on February 16th
, was quite transparent
on their view which BoJ and generally the 2012 events were no game- changer: “Te story of Japan’s current account balance turning deficit and the BoJ’s debt monetization seem to be very popular, especially amongst global investors. From this perspective, news flow since last week has been a perfect storm…. Given these chain of events, JPY has weakened over the period, taking USD/JPY into the high 78s, which is the post-intervention high fom October 31st
last year. However,
could offer a brief selling opportunity for investors interested in selling USD/ JPY”. Later on, on February 21st
JPY advancing beyond 79 as minimal unless US yields rise decisively.
(with
USD/JPY approaching the 80 level for the first time since 2011 Summer) they were actually among the first to revise their forecast (upping end of Q1 from 75 to 79) but still confirming that “looking further ahead, we are keeping our previous forecast unchanged (81 for end 2012, 85 for end 2013, editor note). Although domestic capital flows point to a higher possibility of a further rise in USD/JPY, the process should be gradual”.
Morgan Stanley prompt comment aſter BoJ announcement, on February 15th
, was: “Te move by the BoJ yesterday
was taken by many as “historic” but our own Economists maintain that it will not be enough to generate a sustained rally in the USD/JPY. Tis seems to be a view shared by the lifer community in Japan who see the likelihood of USD/
64 FX TRADER MAGAZINE April - June 2012
And the cross kept going north despite US rate being a clear driver of the move as can be seen in Chart 3.
we do not believe these two factors will have any material impact on currency markets in the near future… Terefore, we expect seasonal JPY buying flows to eventually dominate the market in coming weeks, as USD/JPY has a strong tendency to decline fom mid-February to mid-March, resulting in a lower USD/JPY… We expect USD/JPY to
Chart 3: USD/JPY rallying even without an clear interest rate support
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