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Long USD/JPY after Kuroda’s undoubtedly bold decision – Nomura

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 2, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Delhi) – Research Team at Nomura, suggests that the introduction of negative rates by BoJ at this time is a clear positive surprise to the market and we expect JPY weakness to re-accelerate.

    Key Quotes

    “The USD/JPY reaction on day 1 was smaller than after the QQE 1 and 2 announcements, but we see the decision as highly JPY negative in the medium term.

    We judge the surprise decision last Friday was clearly aimed at preventing JPY depreciating to below 115. Importantly, in its quarterly outlook report, the BOJ added a new positive assessment of JPY weakness on inflation. This new assessment clearly suggests the BOJ thinks JPY weakness will help it achieve the inflation target.

    For the first time since Abenomics began, speculative positions at IMM has shifted to JPY long positions from short positions this year. Investors’ expectations for BOJ easing had weakened, encouraging them to add JPY long positions amid risk-off sentiment. However, as the BOJ now has a new policy option, rate cuts, additional BOJ easing is now more feasible.

    Thus, we expect USD/JPY appreciation after the BOJ announcement to continue, and we recommend entering renewed USD/JPY long positions in spot. We set a stop at 119.00, targeting 125.00.”
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