NAB FX Strategy Research notes that USD/JPY is still at the mercy of US yields and gold.
"Our USD/JPY fair value model has done a good job at tracking the currency and currently is telling us the pair is essentially trading just under fair value with movements in gold and 10y US treasury yields explaining a large proportion of the exchange rate’s behaviour over the past month.
Gold remains in an upward trend established since mid-December last year, more recently however the yellow metal appears to be entering a bit of a correction suggesting near term upside risk for USD/JPY," NAB argues.
"For now we keep the faith on the prospect of an upturn in US growth and inflation and thus we still see USD/JPY heading higher over the coming months," NAB adds.
NAB targets USD/JPY at 114, 116, and 118 by the end of Q2, Q3, and Q4 of 2017 respectively.
USD/JPY is trading circa 110.80 as of writing.
Source: NAB ResearchOriginal Article
