USD/JPY: Capitulation looks overdone – TD Securities

According to analysts at TD Securities the USD/JPY will likely move to the upside in the short term. They have a trading idea of a long position in the pair with a target at 138.00 and stop-loss at 132.45  

Key Quotes: 

“While we think the USD is on course for a tactical pause that should benefit CHF and JPY, the capitulation in USDJPY looks overdone especially given our expectations for upcoming event risks. A stronger than expected ECI print suggests that the market may be premature in expecting the Fed to pivot on policy. We think the market is still underpricing the Fed's terminal rate.”

“The broad USD is also strongly correlated US data surprises and the July payrolls report is likely to fairly constructive. We are also concerned that the upcoming parade of Fed speak will lean hawkish and pushback against a premature pivot. Broadly speaking, we see 135 as an anchor for the pair relative rate spreads.”