Strategists at Westpac Institutional Bank stuck last week with the view that ‘USD/JPY will indeed head lower’ given that other than a ‘large flow’ there was no logical reason for the pair to have done what it did late Feb. They are questioning now how long it could go.
“We have to note that USD/JPY is approaching significantly oversold levels suggesting some near term consolidation.”
“However, consistent with our sense that COVID19 case counts will continue rising sharply, then we simply have to expect further losses in USD/JPY on a multi-week basis.”
“Key, of course, will be the BoJ, but with little pressure for action outside of the March 19 meeting, and little prospect of aggressive moves, risk sentiment will arguably drive the move lower.”
“On a multi-month basis, we expect to see a move down to, and eventually through key trend support at 105.50.”