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21 Apr 2015
USD/JPY correlation's with N225 - TDS
FXStreet (Guatemala) - Shaun Osborne, analyst at TD Securities said that all else being equal, regressions based on price history since 2012 suggest that current N225 levels would support USD/JPY nearer 124 currently (R2 of 0.96 using daily observations).
Key Quotes:
"But a broader assessment of equilibrium, factoring relative US/Japan equity returns, US-Japan 10-year spreads and terms of trade (R2 of 0.87 over the same period) suggest USD/JPY is actually modestly overvalued currently. Our equilibrium estimate based on these variables currently stands at 117.30."
"Our fair value estimate for USDJPY has remained relatively stable so far this year and the lack of fundamental drivers has anchored spot in a tight, sideways range. This is also reflective of the seasonal trend in USD/JPY which, since 1999, has seen the USD reach a highpoint versus the JPY around mid-April, followed by a sideways-to-lower drift until Q4 when USD/JPY typically picks up. We remain bullish on the outlook for USD/JPY and this pattern supports our year-end call for USD/JPY of 125. But trends suggest that we will have to be patient before initiating USD long positions."
Key Quotes:
"But a broader assessment of equilibrium, factoring relative US/Japan equity returns, US-Japan 10-year spreads and terms of trade (R2 of 0.87 over the same period) suggest USD/JPY is actually modestly overvalued currently. Our equilibrium estimate based on these variables currently stands at 117.30."
"Our fair value estimate for USDJPY has remained relatively stable so far this year and the lack of fundamental drivers has anchored spot in a tight, sideways range. This is also reflective of the seasonal trend in USD/JPY which, since 1999, has seen the USD reach a highpoint versus the JPY around mid-April, followed by a sideways-to-lower drift until Q4 when USD/JPY typically picks up. We remain bullish on the outlook for USD/JPY and this pattern supports our year-end call for USD/JPY of 125. But trends suggest that we will have to be patient before initiating USD long positions."