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USD/JPY: bearish bias but look out for surprises - Scotiabank

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 21, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Guatemala) - Eric Theoret, CFA, CMT FX Strategist at Scotiabank explained that USD/JPY continues to move in tandem with measures of sentiment, as shown by its tight correlation to risk reversals—both the one-month and one-year measure hint to extreme levels of relative demand for protection against upside risk in JPY.

    Key Quotes:

    "Relative policy considerations are providing for added support, as we look to the continued narrowing in the U.S.-Japan 2Y yield spread on the back of fading market expectations for Fed tightening."

    "JPY risk remains balanced to the upside, however we highlight growing signs of official concern with a second consecutive day of ‘unnamed official’ media comments—Wednesday’s concerns about JPY strength followed by Thursday’s hints to potential BoJ easing. The next BoJ policy decision is scheduled for January 29th (January 28th EST). Risk of a surprise has risen."
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