USD/JPY: Buy the dips - Westpac

Robert Rennie, Research Analyst at Westpac, explains that they have stuck with a buy the dip strategy for USD/JPY since end-November at 110/112 and clearly end Dec/ early Jan it felt like they had missed the boat but their patience paid off and we indeed did see that dip take place.

Key Quotes

“Mid Feb, we shifted our buy level to 111/113 on the basis that the market was under-pricing the Fed and that strategy worked well again.”

“At the risk of becoming over-confident in our ability to call lows, we shift our buy area up to 112/114. With the Fed set to raise rates next week, 10yr yields more than likely to re-test 2.60% and the BoJ to defend 0.10% on the 10yr JGB, risks of a break above 115 are rising. We still think the final catalyst for a break of 115 would be the BoJ removing the ¥80tn JGB APP target. Were that to happen next week we would revise our buy region up further.”