Technical Analysis

USD/JPY may climb to 112.50 if trade deal is signed – ANZ

ANZ shares their thoughts on USD/JPY with regards to US-China trade talks

The firm’s head of Japan FX and commodities sales, Shigeki Yoshitoshi, argues that USD/JPY may rise to 112.50 if a final US-China trade deal is signed. On the flip side though, Yoshitoshi argues that the pair may drop to around 110.00 if the market fails to see any major progress from a Trump-Xi meeting due this month.

He also notes that the pair may find it difficult to extend its recent gains from current levels but says that it could see some support from Japanese investment outflows ahead of the 31 March fiscal year-end.

The view on trade talks and limited gains for USD/JPY is somewhat similar to what I argued earlier in the week here. A lot of optimism has already been baked into markets at this point, so if the trade deal fails to resolve more structural issues then I reckon that risk assets may not have a lot of fuel to run with in the coming months.
As for the last point on the Japanese fiscal year-end, there’s also an argument for it to be yen supportive with profit repatriation from major companies; so that’s something to take note of over the next few weeks as well.

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