Synopsis:
Bank of America analysts discuss the trajectory of the USD/JPY exchange rate, emphasizing the potential for the rate to test higher levels again without continuous Japanese yen intervention.
Key Points:
- Recent Price Action: USD/JPY has risen again, currently trading above the previously critical level of 155 but below the intervention thresholds of 158 and 160.
- Market Testing: The market is expected to continue challenging the Bank of Japan's (BoJ) tolerance for a weaker yen, particularly around the 158 to 160 levels.
- Lack of US Cooperation: US Treasury Secretary Yellen's recent remarks do not indicate support for intervention, and the US is seen as unlikely to assist actively in stabilizing the yen.
- Data Dependence: The trajectory of USD/JPY is also tied to US economic indicators. Significant weakening in US data could deter further bullish testing of the yen.
Conclusion:
BofA warns that without ongoing intervention, USD/JPY could potentially retest the 160 level. Market dynamics and upcoming US economic data will be critical in determining the direction of this currency pair.