Bank of America Merrill Lynch Research discusses USD/JPY outlook and adopts a structural bearish bias, revising its targets 101 by year-end.
“We find live signs that Japan’s domestic USD demand has started to fall. We remain bearish and cut USD/JPY forecasts. 1. USD/JPY has started to fall in Tokyo market hours. 2. Japan’s outward security investment is slowing down. 3. Oil price decline in 4Q18 to depress energy imports in 1Q19. 4. Machine tool order slump signals M&A slowdown,” BofAML notes.
“We revise USD/JPY forecasts to the downside with the year-end forecast revised down from 105 to 101. We did not pencil in 100 in our forecasts as 101 would provide significant support as in 2016. However, a breach of 100 could precipitate a further move lowertowards 95 given the higher USD/JPY conviction that prevailed in 2018,” BofAML adds.