SELL USDJPY
ENTRY: 132.25-132.30
STOP LOSS: 134.26
TAKE PROFIT: 126.82
The JPY has been one of the main beneficiaries so far from the loss of confidence in the health of the banking system. While policymakers have taken steps over the past week to address those concerns,
it is not yet clear that they are sufficient on their own to quickly restore investor confidence. A further run on deposits and tightening of financial conditions remains a risk that could trigger a deeper sell-off for risk assets.
As a result, it will be difficult for the Fed to strike a hawkish tone in the week ahead even though inflation remains uncomfortably high. A decision to delay further hikes until confidence returns in the banking sector could open the door to further downside for USD/JPY in the week ahead, and encourage US rate market participants to speculate that the next move could even be a cut. At the same time, the recently released results from the annual
Shunto wage negotiations in Japan could reinforce speculative demand for the JPY in the near-term. The results revealed that Japanese labour unions secured stronger wage agreements for the coming fiscal year. Overall wages are expected to increase by 3.8% and base wages by 2.07%. It is the strongest wage agreements reached since 1993 and could encourage the BoJ to shift away from looser policy in the year ahead.
SIMPLE IS BEST
ENTRY: 132.25-132.30
STOP LOSS: 134.26
TAKE PROFIT: 126.82
The JPY has been one of the main beneficiaries so far from the loss of confidence in the health of the banking system. While policymakers have taken steps over the past week to address those concerns,
it is not yet clear that they are sufficient on their own to quickly restore investor confidence. A further run on deposits and tightening of financial conditions remains a risk that could trigger a deeper sell-off for risk assets.
As a result, it will be difficult for the Fed to strike a hawkish tone in the week ahead even though inflation remains uncomfortably high. A decision to delay further hikes until confidence returns in the banking sector could open the door to further downside for USD/JPY in the week ahead, and encourage US rate market participants to speculate that the next move could even be a cut. At the same time, the recently released results from the annual
Shunto wage negotiations in Japan could reinforce speculative demand for the JPY in the near-term. The results revealed that Japanese labour unions secured stronger wage agreements for the coming fiscal year. Overall wages are expected to increase by 3.8% and base wages by 2.07%. It is the strongest wage agreements reached since 1993 and could encourage the BoJ to shift away from looser policy in the year ahead.
SIMPLE IS BEST