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JPY: Pulling The Brakes
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§ Comments by BOJ governor Haruhiko
Kuroda to Parliament on the strength of the JPY caught the markets off-guard,
sending the USD/JPY plunging nearly 1.4% to 123.70. These comments probably
trigger a sell-off by short-term speculators who had rebuilt their long USD/JPY
positions in anticipation of further JPY weakness.
§ These comments suggest that there
might not be any additional easing measures, which puts our USD/JPY forecast
for 3Q 2015 and beyond at risk, but we are maintaining our USD/JPY forecast for
the rest of the year for now. Nevertheless, the normalization of US Fed fund
rate could still keep the USD/JPY on its upward trajectory in the next
three-to-six months.
§ In the near term, daily close below
support at 122.54 (76.4% Fibonacci retracement of 121.52 – 125.86) sees next
support at 121.50 – 121.85 levels (previous resistance before the break-out
that happened in May 2015).
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