USD/JPY: headed to 120 before 115 by end of the year - Rabobank

Analysts at Rabobank explained that the recent gains in the USD combined with the recent movements in US interest rates across the curve suggest that there has been noticeable tightening in US monetary conditions in recent months. 

Key Quotes:

"This supports our view that the Fed is likely only to hike its Fed funds rate once more this year.  

On anticipation of fading optimistic regarding the pace of US rate hikes, we expect the USD to end the year at softer levels then it started vs. a basket of G10 currencies including the JPY.

That said, we expect that the current pull back in the USD could be short-lived and another wave of reflationary optimism may yet be associated with the inauguration of Trump.  For this reason we see scope for USD/JPY to head back towards the 120 area around Q2 before ending the year closer to 115.00.   

On any significant deterioration in risk appetite during the course of 2017, the chances that USD/JPY will lurch back towards the 110 area can be expected to rise."