The USD/JPY pair is scaling sharply higher after a correction near 121.30. Economists at TD Securities see 120 as a floor for the time being and forecast a return to 125 in the second quarter. 

A weak sided bet

“We see a real risk of too low a terminal rate, and ultimately, this will leave USD/JPY strategically exposed to the topside until the end of the Fed tightening begins to take shape or the BoJ magically decides to follow suit. At the very minimum, we think it introduces a 120 floor until we pass through the acute phase of Fed tightening. The earliest we see this happening is sometime in Q3. But for now, USD/JPY dips should be faded.”

“A return to 125 remains the anchor point, but an even more aggressive Fed could easily push the pair further above.”