Analysts at Rabobank forecast further upside for the USD/JPY pair towards the 125 level in the latter half of the year. They don’t see much upside in the short-term considering so much Federal Reserve policy tightening already priced to the dollar. 

Key Quotes: 

“USD/JPY has pulled back from its recent highs aided by verbal intervention from Japanese government officials. However, the JPY is not out of the woods. Another prolonged bout of severe selling pressure on the JPY could put pressure on the BoJ to re-think its QQE programme. We forecast further upside for USD/JPY towards the 125 level in the latter half of the year.”

“While we will be looking out for any further official commentary aimed at stalling the uptrend in USD/JPY, interest rate differentials and Japan’s position as a commodity importer suggest the possibility of further upside potential for USD/JPY this year. That said, due to the fact that so much Fed policy tightening is already priced to the USD, it is our central view that USD/JPY will only climb back to 125 in the latter half of the year. A rapid move to USD/JPY 125 and beyond would likely significantly increase the risk of the BoJ revising its QQE programme.”

This article was originally published by Fxstreet.com.Read the original article here.

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