ING’s FX analysts Francesco Pesole and Chris Turner have observed that recent Japanese efforts to turn around the USD/JPY bull trend have been highly effective.
USD/JPY projected to return to the 137/138 area
They have noted that this success has exposed a ‘fast money’ community that was heavily short on the Japanese Yen (JPY) at the beginning of July. The rapid reversal of this trend, which had been in place for years, indicates a shift in market dynamics.
According to the analysts, the current positioning in the market is more balanced, and they predict that any further decline in the USD/JPY pair will be gradual and orderly.
Their forecast is based on the expectation that macroeconomic factors will once again become the primary drivers of USD/JPY movements, as opposed to mere position adjustments. Factors such as lower growth and interest rates in the US, combined with the Bank of Japan’s anticipated rate hikes (with the next one expected in October), are likely to push the USD/JPY pair back towards the 137/138 level.
Additionally, the analysts highlight that further comments from President Trump advocating for a weaker US dollar could pose a risk to the currency pair’s stability.
Analysis:
The recent developments in the USD/JPY market, driven by Japanese efforts to reverse the bull trend, have caught the attention of top analysts. The shift in market dynamics has led to a more balanced positioning, with expectations of a gradual decline in the USD/JPY pair. Factors such as macroeconomic indicators and central bank policies are likely to play a larger role in determining future movements in the currency pair. Investors should keep a close eye on these developments and consider the potential impact on their investment strategies.