EUR/USD: Merrill Lynch forecasts a strong rally in the first semester of 2018 followed by a strong decline

Bank of America Merril Lynch gives its USD/JPY forecast for 2018:

"There are two major factors that should keep the JPY weak in the first half of 2018.

1- The dynamics of investment portfolios

2- The rate differential between the United States and Japan

An increase in US rates in the first semester followed by a rise in Japanese borrowing rates would lead to a bullish rally of the USD/JPY during the first 6 months followed by a correction in the second semester. If the 10-year US rate rises to 2.9%, we expect the USD/JPY to rise to 122 and then to adjust to 115 by the end of next year.

We are targeting 119, 122, 118 and 115 by the end of the first, second, third and fourth quarters respectively", says Merrill Lynch.