There may be a Need for Patience for Yen Bulls in the USD/JPY

EnclaveFX Ltd
Jun 27, 2023

According to OCBC Bank economic experts, it is expected that the USD/JPY pair will remain firm in the near term. As soon as the BoJ moves away from its YCC regime at some point, the JPY is going to be able to recover, and the Fed is set to pause or pivot its policy at some point.

Differential yields tell a story of a changing economy

As long as the USD carry is substantial, the pair may remain supported until market expectations on the Fed shift away from hawkishness or until BoJ expectations shift.

With the recent rise in USDJPY to 143, it is likely that policymakers will be leaning against the increase in wind energy activities in the future because of the sharp rise in USDJPY. USD/JPY upticks will only be slowed down if such activities are taken place, especially if the uptrend remains intact. It would take an alteration in market dynamics to reverse the trend (e.g. USD to turn around or yield differentials to narrow, etc.) to reverse the trend.

Our outlook for USD/JPY is that the USD can trade lower due to a moderate-to-soft USD profile (as Fed tightening continues into the late cycle, and the USD can fall when a pause or pivot occurs) as well as expectations that the BoJ will shift towards normalization of policy amid increased inflationary pressures in the country.


Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell these assets. You should do your own thorough research before making any investment decisions. EnclaveFX Ltd does not in any way guarantee that this information is free of mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in the Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses, and costs associated with investing, including the total loss of principal, are your responsibility.

EnclaveFX Ltd and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. EnclaveFX Ltd and the author will not be liable for any errors, omissions, or any losses, injuries, or damages arising from this information and its display or use. The company is not responsible for errors or omissions.