Goldman Sachs: JPY strength near its limits and should be faded | Forexlive

Goldman Sachs provides an analysis of the Japanese yen, suggesting that its recent strength may be nearing its limits. The firm recommends against pursuing further outperformance of the JPY, based on forecasts and market dynamics.

Key Points:

• JPY Outperformance Caution: Goldman Sachs expresses caution about chasing any further outperformance of the JPY, aligning with their economists’ more dovish forecast for the Bank of Japan (BoJ) compared to market expectations.
• December BoJ Meeting as a Marker: The upcoming December meeting of the BoJ is seen as an important indicator for assessing the central bank’s policy trajectory.
• Limit to USD/JPY Downside: There is a perceived limit to the downside of USD/JPY as long as the US maintains a trajectory towards a soft landing and the BoJ remains hesitant to signal an imminent hiking cycle.
• Recommendation on JPY Strength: Goldman Sachs believes that the recent strength in the Yen is approaching its limits and advises fading further moves higher.

Conclusion:

Goldman Sachs’ analysis suggests a cautious approach towards the JPY, particularly in terms of expecting further strength. The firm’s stance is influenced by a dovish outlook for the BoJ and the perceived limits to the USD/JPY downside amid a potential soft landing in the US economy. Consequently, they recommend against pursuing or expecting significant additional gains in the JPY, indicating that its recent appreciation may be close to reaching its peak.