USD/JPY: Goldman Sachs Advises Going Short in Spot and Owning Downside Structures in Options.

Despite the recent rise of the major currency pair, Goldman Sachs (GS) maintains its pessimistic view for the USD/JPY values.

June 30, 2022 - 12:40 PM 255 views

USD/JPY: Goldman Sachs Advises Going Short in Spot and Owning Downside Structures in Options.

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© USD/JPY: Goldman Sachs Advises Going Short in Spot and Owning Downside Structures in Options.

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Despite the recent rise of the major currency pair, Goldman Sachs (GS) maintains its pessimistic view for the USD/JPY values.

In its most recent report, GS stated that "we still think the Yen offers attractive asymmetry due to rising US recession risks and the likelihood for a change in monetary policy in Japan itself."

Key Notes

We recently argued that end-2024 OIS rates would drop to 1-2 percent, or roughly 75-175bp below current levels, in a US recession.

We believe that investors should think about purchasing USD/JPY downside structures as options now and try to short USD/JPY in-market when there is a glaring deterioration in the US labour market and/or indications that the BOJ's policy stance is about to change.

Reversal of the USD/JPY from a 24-year high

Despite disappointing Industrial Production for Japan, which fell by 7.2% MoM in May compared to expectations of -0.3% and -1.5%, USD/JPY eased from the multi-day high reached the day before to 136.60 by press time.

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