Where to buy the dips?
From Societe General
The market is unwinding USD/JPY longs initiated on the premise of US reflation, offering cheaper levels to reinstate fresh longs. The Treasury market remains too cautious regarding the Fed pace ahead, whereas the BoJ won't tolerate exacerbated yen strength.
To attribute the fall in USD/JPY from 118 to 114 as 'noise' isn't very helpful, but beyond pointing out that more growth and less deflation would suit PM Abe just fine, I still think the drivers of USD/JPY are mostly whether the BoJ can hold real yields down and US real yields can resume their uptrend. If so, the only question is where to re-sell the yen.
...Past patterns suggest that the USD/JPY could revisit 112-113 in the near-term, before bouncing back towards - and probably beyond - the recent 118 high.
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