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Trading news
18 Feb 2013
Forex Flash: Jump in USD/JPY unjustifiable; risk of deeper Yen correction - RBS
The reality in the Japanese Yen front, in view of RBS currency strategist Greg Gibbs, "is that not much has actually changed recently, certainly not enough to justify a 15 to 20% jump in USD/JPY."
"There is a risk that current holders of short positions in JPY start to question why they are so bearish once the JPY fall loses momentum. If they are attached to a narrative and momentum, their conviction will be low when the correction comes" Greg says.
Mr. Gibs' preferred strategy for the short term "is to expect a range between 88/95 with a view to buy for the longer term as the relative fundamentals continue to argue for a weaker JPY over the medium term" he notes.
Adding to downside risk, according to Greg, "is the potential for a correction in global risk appetite." Potential trigger points are "weak European economic data and political developments in Italy and Spain and the US fiscal debate come to mind", he says.
"There is a risk that current holders of short positions in JPY start to question why they are so bearish once the JPY fall loses momentum. If they are attached to a narrative and momentum, their conviction will be low when the correction comes" Greg says.
Mr. Gibs' preferred strategy for the short term "is to expect a range between 88/95 with a view to buy for the longer term as the relative fundamentals continue to argue for a weaker JPY over the medium term" he notes.
Adding to downside risk, according to Greg, "is the potential for a correction in global risk appetite." Potential trigger points are "weak European economic data and political developments in Italy and Spain and the US fiscal debate come to mind", he says.