USD/JPY: Maintain dip-buying tactics – Deutsche Bank

Taisuke Tanaka, Strategist at Deutsche Bank believes that the USD/JPY will remain within its recent range of around ¥110 for now and at the moment buy on dip tactics looks ideally suited for the pair.

Key Quotes

“One factor is the ongoing steadiness of the US economy, as seen in US payroll data last Friday. In addition, Japanese institutional investors continue to buy quietly on weakness whenever the USD/JPY dips to ¥110 or below. The trend is supported as well by bearish yen sentiment from the strength of the euro and other non-USD currencies. Polls by the Nikkei and other major media find that support for the Abe administration has risen several percentage points since the recent Cabinet reshuffle, indicating a retreat in concern over political risk-off factors.”

“At the same time, we see no evident catalyst sufficient to spark a renewed rally in the USD/JPY anytime soon. US inflation remains low despite the buoyant economy, and expectations of a rate hike next month are virtually nil. Congress will again face the government debt cap problem when it resumes deliberations on 29 September soon after the summer holidays, which could be a source of market frustration. Overseas speculators still hold significant long positions in USD/JPY markets. Domestically, hedged USD/JPY sales by exporters and institutional investors may put pressure on the markets amid thin trading ahead of the summer Obon holidays.”

“USD/JPY bulls will need to wait a bit longer for the next opportunity patiently. We continue to recommend tactical dip-buying of USD/JPY at around the recent range.”