Sean Callow, analyst at Westpac, suggests that the support for USD/JPY from rising US yields is starting to moderate.
Key Quotes
“The 10 year Treasury yield briefly printed a 6 week high on Tuesday but it looks comfortable around 1.80%, consistent with USD/JPY’s struggle to extend far beyond 109.00.”
“Risk appetite could hardly be more supportive, with global equities reaching fresh record highs this week and USD/JPY 1mth implied volatility retesting April lows around 5%.”
“So it seems unlikely that global risk appetite will be sufficient fuel for a run at 110.”
“Short-covering of speculative positions has probably run its course.”
“With the BoJ’s cautious policy tweaks last week almost forgotten already, this leaves US yields and broad US$ sentiment as key in the week ahead. Resilient DXY short term suggests support on dips towards USD/JPY 108 and some fresh probes above 109 but no major range breakout.”
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