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Skeptical of the move to 110 – TD Securities

Mazen Issa, Senior FX Strategist at TDS explains they are skeptical of the recent move in USD/JPY to the 110.00 zone. 

Key Quotes: 

“Over the last week, USDJPY comfortably punched through the 200dma to now reclaim the 110 handle. The move has garnered some attention. We are skeptical of this move.”

“We note that the USDJPY’s beta to equities has remained benign. Without the corresponding move in 10yr rate spreads however, a move higher in spot FX is likely to be fleeting. We do not see an imminent catalyst to unnerve 10yr USTs from its recent range.”

“Portfolios outflows have – particularly in fixed income – has appreciably slowed towards the end of 2019. This followed a rather extensive asset re-allocation last year. Because of this, we would expect these flows to be muted into Japan’s fiscal year-end.”

“110.67 should mark notable resistance.”

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