USDJPY: Strategy Views from Westpac
With the BoJ and FOMC meetings out the way, the market will remain focused on the idea that we are heading towards a period of extended outright policy divergence and that this period could commence as soon as Q2 this year.
However, given Fed Chair Powell’s pushback on March and risks that we have towait until after April when the BoJ will include inflation forecasts for FY26 in its Outlook Report for it to end ZIRP, it could be many months before we actually seeoutright divergence beginning to take place.
Thus, the default appears to be one of USD/JPY staying in a 146-149 range with risks that we probe higher towards 148/150 if we don’t see any signs of stability/ improvement in inflation in Japan ahead of the March 18/19 MPM and then April 26 Outlook meetings.
We have tended to argue for either waiting for a pop towards 150 or a breakdown through 146 as a clear sign that the trend has indeed rolled over and thus that we are moving into sell mode. Sowe sit neutral for another week
However, given Fed Chair Powell’s pushback on March and risks that we have towait until after April when the BoJ will include inflation forecasts for FY26 in its Outlook Report for it to end ZIRP, it could be many months before we actually seeoutright divergence beginning to take place.
Thus, the default appears to be one of USD/JPY staying in a 146-149 range with risks that we probe higher towards 148/150 if we don’t see any signs of stability/ improvement in inflation in Japan ahead of the March 18/19 MPM and then April 26 Outlook meetings.
We have tended to argue for either waiting for a pop towards 150 or a breakdown through 146 as a clear sign that the trend has indeed rolled over and thus that we are moving into sell mode. Sowe sit neutral for another week
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