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USDJPY forecast for 11.06.2020

June 11, 2020

June 11, 2020

Yens comes back homeDmitri Demidenko

Repatriation of capital into Japan and the weakness of the greenback

send the USD/JPY down

The time when the US dollar was a more popular safe haven than the Japanese yen is over. The yen has now a good chance to stabilize without being concerned that geopolitics and different shocks will strengthen it. It turns out that the yen can grow without a drop in the global risk appetite. Societe Generale says Japan now seems the “perfect place to be,” especially in equities. Stable balance sheets of local corporations, the growth of dividends, political stability, and relatively low buy price allow the Japanese securities to lure back foreign investors.

Societe Generale increased its weighting on Japanese stocks to the maximum. The firm recommends its clients to allocate their capitals with 45% of assets in fixed income and cash, 45% in equities, and 10% in commodities. In my opinion, the capital inflow into Japan and the weakness of the greenback are the major reasons for the [USD/JPY][1] fall. TOPIX recouped three-quarters of the losses and has rebounded by 37%. Overseas traders realized they had made a mistake and started buying Japanese securities. They sold more than $41 billion of Japanese stock futures in the first five months of the year, the most since at least 2015. However, in the second half of May, they turned net buyers, loading up about $7 billion.

Dynamics of foreign investments into Japanese stocks

 ![LiteForex: USDJPY forecast for 11.06.2020][2]

Source: Bloomberg.

The rally of Nikkei 225 and TOPIX made the Japanese investors change their minds too. Earlier, amid an increase in the global risk appetite, Japan’s investors directed their capitals into the USA, which strengthened the direct correlation between the [USD/JPY][1]. Now, however, Japan’s stock market looks a good competitor to the US stock market that seems to be entering the overbought territory. The Fed and the OECD suggest the US economic recovery should look like the Nike logo, while Japan’s economic recession is likely to be not as deep as it was thought before. In the first quarter, Japan’s GDP contracted by 2.2%, which is less than the previous gauge of 3.4%.

Dynamics of Japan’s GDP

![LiteForex: USDJPY forecast for 11.06.2020][3]

Source: Bloomberg

According to 72% of 47 experts polled by Bloomberg, the BoJ should keep the current parameters of the monetary policy at the meeting on June 15-16. Since March, the central bank promised purchases of an unlimited amount of government bonds, increased its ETF purchases, and launched credit programs of $700 billion. About 71% of analysts say the regulator has done enough or more than enough, the need for the expansion of the monetary stimulus is less, which is good news for the yen.

Projections for BoJ monetary expansion

![LiteForex: USDJPY forecast for 11.06.2020][4]

Source: Bloomberg

Therefore, amid the growth of the demand for Japan’s equities and the weakness of the US dollar, it is relevant to sell the [USD/JPY][1] on the rise using the [LiteForex convenient services][5]. The shorts entered at level 100 based on the recommendations given in[ April][6] and [May][7] should be held. The first downside targets are at 105.9 and 105.2.

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Price chart of USDJPY in real time mode

![Yens comes back home][10]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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  1. my.liteforex.com/trading/chart?symbol=USDJPY&returnUrl=true
  2. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/stocks-japan-11-06-20.jpg?w=30&s=0b52307c75c93e68217274eb65779181
  3. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/japan-real-gdp-11-06-20.jpg?w=30&s=c8111b8fb5f30c8a142b3dd9c4a7b762
  4. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/boj-stimulus-11-06-20.jpg?w=30&s=04a359a1be048a91b4fa7a674d7b8b6d
  5. my.liteforex.com/?go-zone=ZASdmqixF1Cnq2et7jKB-Fl4wu_-MKOB
  6. www.liteforex.com/blog/analysts-opinions/yen-was-spurred/
  7. www.liteforex.com/blog/analysts-opinions/the-corridor-is-too-narrow-for-the-yen/
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  10. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/liteforex-blog-usdjpy-11-06-20.jpg?q=75&w=1000&s=b8e5b8d1d7f1d2a1e9b259edc208de55