USD/JPY could test 115.00 in the near term – Danske Bank

Chief Analyst at Danske Bank Pernille Henneberg has not ruled out a visit to the 115.00 area in the short term.

Key Quotes

“USD/JPY continued to rise yesterday supported by risk appetite and a further sell-off in US fixed income markets. The rally was reinforced as the cross broke above the 100-day moving average, which paved the way for a spike above 114 (highest since Mid-March)”.

“As a Fed rate hike in June now is priced with nearly 80% probability and USD/JPY looks increasingly overbought from a technically point of view, we expect the appreciation momentum to ease. Essentially, the key drivers for the cross remain relative interest rates - most notably the 10Y US yield – and risk appetite in general”.

“Hence, if markets increase expectations of a June rate hike further, a test of 115 should not be ruled out in the short term. Longer term, the current level in USD/JPY is justified – we target the cross at 116 in 12M as the widening interest rate spread between the US and Japan outweighs the underlying fundamental JPY appreciation pressure”.