USD/JPY continues to trade close to the 107-mark. What is the outlook for the pair?
Credit Agricole Research discusses JPY outlook and adopts a neutral bias around current levels.
Here is their view, courtesy of eFXdata:
“The JPY failed to weaken meaningfully, irrespective of better risk appetite. This appears to be partly due to further rising distrust in the BoJ’s ability to follow up on its threat to ease monetary policy further. In fact, the BoJ held an MPM last week, in which it left intact, as expected, all three pillars of the current monetary policy framework,” CACIB notes.
“We remain of the view that the BoJ has moved into wait-and-see mode. While this should make the currency more sensitive to external factors such as global risk sentiment, it must also be considered that little scope for more aggressive policy action could lower the JPY’s funding attractiveness. From that angle, we expect downside from the current levels to prove limited, irrespective of further improving global risk sentiment and especially when focusing on majors such as USD/JPY. After all, the USD itself became negatively correlated with risk appetite,” CACIB adds.
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