USD/JPY: Narrower spreads should steady the yen – Scotiabank
The Japanese yen is the worst performing currency among the majors so far this year. But economists at Scotiabank believe that JPY’s slide may be slowing.
140 may be around the limit of the USD rise in this cycle
“We think that the apparent cap on US yields should be modestly JPY supportive and help stabilize the recent yen decline.”
“We noted that USD/JPY spot trends (higher highs) is diverging with the daily RSI (lower highs). This divergence is a classic sign that a move may be poised to reverse. There are scant signs of a reversal in terms of pure price action, however.”
“Firmer resistance is developing in 136.75/00 but the USD will have to trade below 134 at the moment in order to signal some (even modest) downside pressure is developing.”
“Given the extent of the USD rally so far this year, we are attentive to signs of a more significant reversal ahead of the 140 zone which we think may be around the limit of the USD rise in this cycle.”