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30 June 2022

USD/JPY: Consider owning downside structures in options, go short in spot – Goldman Sachs

Goldman Sachs (GS) holds onto its bearish bias for the USD/JPY prices, despite the major currency pair’s latest run-up.

“We still think the Yen offers attractive asymmetry due to rising US recession risks and the prospect for a change in monetary policy in Japan itself,” said GS in its latest note.

Key quotes

In a US recession, we recently argued that end-2024 OIS rates would fall to 1-2%, or about 75-175bp below current levels.

We think investors should consider owning USD/JPY downside structures in options now, and look to go short USD/JPY in spot on clear weakness in the US labor market and/or signs of an imminent change in the BOJ's policy stance.

USD/JPY retreats from 24-year high

Despite downbeat Industrial Production for Japan, to -7.2% MoM in May versus -0.3% expected and -1.5% prior, USD/JPY eases from the multi-day high marked the previous day to 136.60 by the press time.

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