FXStreet (Delhi) – Taisuke Tanaka, Strategist at Deutsche Bank, believes that it will be tough for the USD/JPY to gain sufficient momentum to climb beyond 120 as the economists have lowered their US GDP forecasts to 2.4% in 2015 and 2.5% in 2016 and had also changed their outlook for the first Fed rate hike from later this year to March 2016. Key Quotes “The series of China shocks has deepened the sense of fragility in emerging and commodity markets. The sluggishness in global demand has hurt US exports, and there is little recovery in sight for the US energy sector in view of the slump in resource prices.” “Nevertheless, we do feel the rate will be firmly supported at around 120 from buying on weakness by Japanese pension funds and exporters. The rebound in stocks and emerging markets spurred by speculation of a later-than-anticipated US rate hike indicates that the markets are not overly pessimistic about the fundamentals. Market expectations for additional BoJ easing on 30 October may have curbed the impetus of USD/JPY bears (although we do not foresee additional easing this month).” “We maintain our belief that even if the US economy should grow at a 2.5% pace, conditions for a rate hike will gradually fall into place, sending the USD/JPY out of its tight range and above the 120 level. Our official projection for end-2015 is 125 now, but that was based on a Fed rate hike within the year. With the revision in the rate hike forecast, we now feel that the JPY will follow a liner path toward 128 at end-2016 (provisionally, stating a level from current 120, then 122 at end-2015).” For more information, read our latest forex news.