As the market continues to focus on one side of the USD/JPY exchange rate, Rabobank’s Senior FX Strategist Jane Foley predicts a potential softening of the currency pair to the 142 area in the coming months.
Recent market panic was triggered by sudden changes in both BoJ and Fed policy expectations, along with strained market positioning. Despite a significant adjustment in positioning, market sentiment remains nervous, leading to sharp movements in asset prices.
While USD/JPY has been trading within the 145 to 147 range recently, there is a likelihood that this range will hold in the near-term. The USD is showing signs of recovery after a recent sell-off, with potential for further gains ahead of Fed Chair Powell’s upcoming testimony on Friday.
Looking ahead, Foley expects USD/JPY to strengthen over the next 6 months, assuming another BoJ rate hike, possibly around the turn of the year.
Analysis:
Overall, the forecast for USD/JPY suggests a potential softening of the currency pair to the 142 area in the near future. Market volatility, changes in central bank policies, and market sentiment are key factors influencing the exchange rate. Investors should closely monitor upcoming events, such as Fed Chair Powell’s testimony, for potential impacts on USD/JPY movements. Additionally, the possibility of a BoJ rate hike in the coming months could further strengthen the USD against the JPY. It is important for investors to stay informed and consider these factors when making decisions regarding their finances and investments.