USD/JPY: Risks clearly remain - Westpac

According to Robert Rennie, head of EM strategy at Westpac, improved risk sentiment in a range of markets including credit, EM equity and peripheral European bond markets has not really manifested itself in a weaker JPY, though price action in recent sessions has clearly improved.

Key Quotes

“Daily technicals turned positive through the second half of last month and the series of higher lows and highs since then have added to the more upbeat structure.”

“However, risks clearly remain. The Trump-Kim summit on Feb 27/28; the Powell semi-annual report to Congress on Feb 27/ 28; the delayed US Q4 GDP to be released Feb 28 and then the delayed increase to 25% tariffs is still scheduled to take place on March 2 unless an agreement is forthcoming. Thus reasons for remaining cautious through the end of Feb/ early March are pretty clear.”

“We thus maintain a neutral bias over the next few weeks but still subscribe to higher levels as we move through Feb into March. A clear break of 110 would see us targeting a move to 111.25.”