Back
11 Mar 2013
Forex Flash: A storm to and through 100 brewing in USD/JPY - RBS
If the ongoing rally in the USD/JPY did not satisfy enough buyers, RBS FX strategist Greg Gibbs thinks more opportunities to buy the pair will soon arise, with "a potent storm sharply higher to and through 100..." he says. The analyst speculates on "a move higher in 10s yield, and a steeper 2:10s" as a potential catalyst.
Greg expands: "On the outlook for 10Y US yields, Treasury strategy colleagues Bill O'Donnell and John Briggs have for some time now identified 2.06% then 2.13% as key levels of (price) support. That holds for now but, post Payrolls, yields are right back at the top of the range. If that support gives way in 10s, and with 2s yields still anchored as Bernanke and Yellen continue to preach lower for much longer, then 2:10s potentially steepens significantly and takes USD/JPY with it – higher."
Japanese policy initiatives will also be key, Greg says: "Most crucial here will be the 4th April BOJ policy meeting, the first under the new governor (likely Mr Haruhiko Kuroda), which we think will be dovish enough in style and substance to encourage domestic Japanese investment trust and pension fund investors to join in selling JPY in the new fiscal year."
Greg expands: "On the outlook for 10Y US yields, Treasury strategy colleagues Bill O'Donnell and John Briggs have for some time now identified 2.06% then 2.13% as key levels of (price) support. That holds for now but, post Payrolls, yields are right back at the top of the range. If that support gives way in 10s, and with 2s yields still anchored as Bernanke and Yellen continue to preach lower for much longer, then 2:10s potentially steepens significantly and takes USD/JPY with it – higher."
Japanese policy initiatives will also be key, Greg says: "Most crucial here will be the 4th April BOJ policy meeting, the first under the new governor (likely Mr Haruhiko Kuroda), which we think will be dovish enough in style and substance to encourage domestic Japanese investment trust and pension fund investors to join in selling JPY in the new fiscal year."