- Risk appetite and BOJ restraint weigh on the Japanese yen.
- USD/JPY expected to appreciate towards 117.00/10 – Credit Suisse.
USD a moderate bid tone on Tuesday, extending its rebound from the low of 113.40 reached last Friday. USD/JPY has returned to levels above 114.00, with the safe haven yen weighed down in a market in risk appetite mode, before touching resistance in the 114.30 area.
Yen weakens on risk appetite, BOJ bows out
The Japanese yen has opened the week on a soft note. Thanks to subdued risk appetite with quarterly earnings reports sparking advances in the world’s major equity markets.
In addition, the market is bracing for a dovish monetary policy statement from the Bank of Japan this week. Which could add negative pressure to the yen. Since the US Federal Reserve expects to begin tapering its stimulus program in the coming months. A widening yield spreads between US and Japanese Treasuries was a major driver of USD/JPY’s nearly 5% rally since late September.
Macroeconomically, US new home sales increased 14% in September. And additionally reached a six-month high rate of 800,000 units, which was higher than the 760,000 units analysts expected. In addition, the Richmond Fed manufacturing index improved to 12 from -3 in the previous month, with all components, shipments, new orders and employment showing improvement. In contrast, the US house price index and S&P Case-Schiller house prices have increased disappointing expectations.
USD/JPY expected to rebound towards 117.00/10 – Credit Suisse
From a broader angle, Credit Suisse economists see the pair in a consolidation phase ahead of further appreciation. “With a major base established above the 112.40 2019 high, we look for an eventual break above 114.73/92 in due course for a move to 115.51 initially and then the long-term downtrend from April 1990 at 117.00/10. We expect a potentially prolonged consolidation phase to emerge here.”