June 30, 2022 - 12:40 PM 255 views
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."
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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