USD/JPY seen rangebound in the medium term – Danske Bank

Senior Analyst at Danske Bank Morten Helt believes the pair is poised to stay sidelined between 111 and 114.50 in the medium term horizon.

Key Quotes

“In the near term, US yields and risk sentiment are likely to remain the key drivers for the cross. However, we expect BoJ QE exit concerns and uncertainty about the future BoJ leadership to weigh on USD/JPY, and we have thus lowered our 1M forecast to 112 (previously 113”.

“Over the medium term, we still see USD/JPY trading mostly sideways within the 111-114.50 range, targeting 113 in 3M. While a continuation of the global recovery and suppressed risk premiums are expected to be JPY negative and as we still expect Fed-BoJ divergence to support USD/JPY, we see little potential for a substantial move higher over the medium term. We target 114 in 6- 12M, with risks increasingly skewed to the downside amid stretched short JPY positioning, further flattening pressure on the US yield curve and a weaker growth outlook in China”.