Deutsche Bank believes that its medium-term outlook for a sustained uptrend in the USD/JPY remains intact as it's consistent with the recovery trend in the US and Japanese economies, and prospects for a US rate hike amid extended QQE in Japan.
However, near-term, DB thinks that USD/JPY sentiment can be mixed.
"In the short-run, the USD/JPY should receive steady support around the 118–120 level as Japanese pensions and importers continue to buy on dips," DB projects.
"Even if the rate were to temporarily dip below 118, our recommendation would be to take advantage of the weakness and continue accumulating longs. We believe an approach of resolutely buying the dip would be effective as strategy to boost alpha through this year," DB advises.
