JPY Strength Favored as USD/JPY Hits Seven-Month Low
USD/JPY touched a seven-month low at 152.89 before rebounding above 154.00, according to Brown Brothers Harriman's (BBH) Elias Haddad. The pair's support sits near 152.00, while resistance is offered at 155.00.
Haddad argues that the Japanese Yen's recent strength is flow-driven rather than a hawkish Bank of Japan (BoJ) repricing. He points out that JPY's recent overshoot has come despite no meaningful hawkish BoJ repricing and a modest pullback in longer-term JGB yields.
The sustainability of USD/JPY's plunge hinges on next week's Fed and BoJ rate decisions, with four possible scenarios outlined by Haddad. The risks are skewed towards a stronger JPY: Fed hold, BoJ +25bps: USD/JPY down; Fed hold, BoJ +50bps: USD/JPY sharply lower; Fed +25bps, BoJ +25bps: USD/JPY rebound; and Fed +25bps, BoJ +50bps: USD/JPY down.