USD/JPY: After The Recent Bottom: What's The Trade? – BofAML

In early April, Bank of America Merrill Lynch FX Strategy Research argued that USD/JPY’s potential technical dip below 110 would not be sustainable.

In that regard, BofAML notes that following this call, USD/JPY subsequently breached 110, but bounced off the low 108s, above the 50% retracement (107.87) of the post-US election rally before succeeded in closing the month above the monthly ichimoku cloud (109.0) and crawling back above the weekly ichimoku cloud (111.39).

What’s next for USD/JPY? Firmer downside, vulnerable upside. 

“The question now is whether USD/JPY will trend downward again, trade in a range, or recover a rising trend…While a widespread decline in market volatility may suggest a range market with marginal support for yen-carry trades for now, we believe USD/JPYs downside is firmer, and upside more vulnerable,” BofAML argues.

What’ the trade? Long EUR/JPY and Long NZD/JPY. 

“USD/JPY is now trendless and declines in the US and RS indicators suggest light positioning in JPY short…We like EUR/JPY on monetary policy divergence, and NZD/JPY based on positional argument,” BofAML adds. 

USD/JPY is trading circa 113 as of writing. 

Source: Bank of America Merrill Lynch Rates and Currencies Research

The article is published by one of the foremost sources of Forex trading information. Link to the original article above.

from eFXNews

from Online Forex Trading Resource
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