Forex Flash: USD/JPY correction on the horizon – Westpac

According to FX Strategist Robert Rennie at Westpac, “While the USD/JPY volatility is expensive at the moment, it is expensive for a good reason – the two-week realized daily volatility is currently at 15%. The recent aggressive swings in sentiment mean it is all but impossible to sell spot without a very wide stop. The two-week time horizon looks optimal for us as it takes into account a number of key events including tomorrow’s Japanese GDP release and the BoJ meeting, this weekend’s G20 meeting, the Italian elections (February 24/25) and Bernanke’s semi-annual testimony on monetary policy to the Senate Banking Committee (February 26). We see a move back towards the 88/89.5 area as a reasonable target on a USD/JPY correction in the coming weeks.”