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Wells Fargo Strategist: Rising Intervention Risks Suggest Tactical Short on USD/JPY

Wells Fargo strategists point out that the macro environment is increasingly favorable for Japanese authorities to take intervention measures to support the yen, recommending a tactical short on USD/JPY in the coming weeks. "The current market environment is quite attractive, with the U.S. approaching holidays and the long positions in USD/JPY being overly crowded. Additionally, recent interactions between U.S. and Japanese officials indicate that the Ministry of Finance and the Bank of Japan have received the green light for intervention," wrote Wells Fargo macro strategist Erik Nelson on Thursday. Wells Fargo recommends selling USD/JPY with a target of 155.80 and a stop-loss at 163.20. For the dollar to strengthen further, "the Fed would need to raise rates in July, which we believe is a very high threshold," Nelson said. (Bloomberg)

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