USD/JPY: Break over 150.00 looks more likely than not over the short term – MUFG
18.10.2022, 15:58

USD/JPY: Break over 150.00 looks more likely than not over the short term – MUFG

The USD/JPY is trading above 149.30, at fresh multi-decade highs. Analysts at MUFG Bank, see the pair likely to break above 150.00 in the short term. They doubt over the ability of Japanese authorities to turn the weak yen trend. 

Key Quotes:

“We are maintaining the unusually wide range we set last month after the Japanese authorities had intervened to stem the depreciation of the yen. We decided against a bearish bias despite the yen-buying intervention on the view that there would be appetite to buy at lower USD/JPY levels. That proved correct and the yen now today is trading at slightly weaker levels than when the intervention took place in September. We expressed doubts over the ability of the Japanese authorities to turn the weak yen trend without a change in fundamentals.”

“We have turned bullish again on USD/JPY based on the fact that the US dollar backdrop dictates a higher USD/JPY and we see the Japan authorities as being reluctant to protect a specific level. Hence a breach to new highs over 150.00 looks more likely than not over the short-term.”

“The threat of intervention is high and hence a risk to our bullish bias is that the authorities conduct intervention that is more aggressive and more persistent than we assume that would then have a bigger impact on driving USD/JPY lower. There are also risks surrounding the FOMC meeting on 2nd November. A risk to our view is that the FOMC decide to slow the pace of tightening by hiking by only 50bps or hikes by 75bps but provides a dovish communication on the outlook going forward. We think after the CPI data last week this is unlikely.”

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