USD/JPY: Rally unlikely to continue beyond 116.00 – Goldman Sachs

Analysts at Goldman Sachs believe USD/JPY is unlikely to advance beyond 116.00 amid ongoing expectations of tighter monetary policy globally.

Key quotes

"Looking ahead, given the relatively more aggressive policy expectations now priced across the G10, we see a higher bar for the USD/JPY rally to continue much further. “

“On our models, if the market were to pull forward the Fed hiking cycle- akin to the recent shift in BoE pricing-it could push USD/JPY up to 116, but the further upside would likely require a move higher in the market's view of the terminal rate.”

“For this reason, investors might consider expressing yen downside views in EUR/JPY instead, where our rates strategists see a case for a steeper 2s5s.”