USD/JPY: is the USD rally so strong?

USD/JPY: is the USD rally so strong?

2019-11-11 • Updated

Eased geopolitical and trade tensions led to the rise of the US dollar and the decline of the Japanese yen. On April 18 the US dollar managed to recover versus the Japanese yen and USD/JPY started its upward movement. The pair had already reached highs of the middle of February. Will the greenback continue to appreciate against the yen or the positive period for the USD will come to the end soon? Let’s look at the forecasts of the well-known financial institutions.

Short-term trade

UOB (a Singaporean United Overseas Bank).

The UOB predicts a further short-term rise to 109.30. If USD/JPY hits 109.30, it will signal a continuation of an upward movement to 110. Although the bank stays to its positive forecast, it does not exclude a possibility of a pullback to 107.80 that will indicate a downward movement.

Barclays (a British multinational investment bank and financial services company)

Analysts of Barclays see geopolitical and trade tensions as a key factor of the pair’s movement. According to the forecast, in the short-term USD/JPY will be boosted by a risk recovery. But they do not expect a bullish trend to continue for a long time. The North-South Korea summit (April 27) will influence the situation in the market.

Middle-term trade

J.P. Morgan (a global financial services firm and one of the largest banking institutions in the US) 

According to J.P. Morgan, the US dollar remains under pressure because of political and trade uncertainties. Any escalation of conflicts will lead to the greenback’s decline. Another important factor for USD is a monetary policy. While the US dollar is late in its tightening cycle and the Japanese yen is very early in it, so in the middle-term JPY has a higher potential for the upside than the greenback.

Danske Bank (the biggest commercial Danish bank)

The bank predicts 110-115 levels in 6-12 months that will be supported by continued solid global growth outlook and Fed-BOJ divergence.

Based on the above, we can say that in the short-term, traders can rely on the upward movement of the USD/JPY pair. However, the middle-term trade may differ. If geopolitical and trade-related issues get worse, the dollar will weaken. At the same time, solid economic growth may support the greenback.

 

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