USD/JPY: Extent of upside looks limited by Japan’s intervention risks – Goldman Sachs

Analysts at Goldman Sachs believe that the bullish potential in USD/JPY appears limited, in the face of risks of intervention by the Japanese authorities to stem the yen downfall.

Key quotes

"Activity data have looked more resilient over the past week, including upside surprises in ISM manufacturing and nonfarm payrolls. If the trend continues-possibly nudging the FOMC toward a fourth 50bp rate increase in September-we think USD/JPY has room to move moderately higher.”

"That said, the extent of upside still looks limited by official intervention risks and (eventually)pressure on YCC, as domestic growth and inflation pick up this year alongside higher global yields (if the US avoids recession).”

“...As a result, we continue to think that being long Yen represents an attractive way to position for that base-case outcome and are keeping our short USD/JPY trade recommendation in options open.”

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