It may be true that most countries want a bit of FX weakness but there is a limit. Japan is beginning to show signs of strong growth and the USD/JPY rally abruptly ended Thursday on an FX quip from Fin Min Taro Aso. On the day, CHF led the way while the antipodeans lagged. The focus will remain on the yen with a slate of top-tier economic data up next. In today's Premium Insights, we added a EURAUD trade with 3 charts, currently +50 pips in the money.
It's been a generation since markets have had to deal with a strong Japanese economy and at the moment, the reaction is total skepticism if not disbelief. But Japan has strung together a few good months and the consensus for 2015 growth has moved close to 2% from 0.9% at the start of the year.
We don't know if Abenomics is really working but Japanese officials have maintained an upbeat outlook and talk of more QE has fallen to the wayside. If they believe they can achieve solid growth – which is anything close to 2% in Japanese terms – then they might believe USD/JPY at these levels is high enough.