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Analysts at MUFG Bank, explained the USD/JPY pair is tightly linked to the global investor risk sentiment. They have a bullish bias on it and see it trading in the 106.00/111.00 range.  

Key Quotes:

“The yen continues to trade on the back foot in the near-term. After hitting an intra-day low of 104.46 on the 26th August, USD/JPY has rebounded back towards resistance from the 200-day moving average at 109.00. The yen has been undermined by the ongoing improvement in global investor risk sentiment. The US and China have made progress towards a partial trade deal which is expected to be finalized before the end of this year. Market attention has now shifted to the details of the deal. If it involves a larger roll back of tariffs it would increase downside risks for the yen. The White House is expected to suspend tariff hikes planned for December, although it remains to be seen to what extent tariff hikes implemented in September and/or in 2018 will be reversed.”

“The improvement in global invest risk sentiment has not yet been undermined by the modest adjustment higher in yields. The 10-year UST yield temporarily rose back towards 2.00% as concerns over a sharper US slowdown have eased, and the Fed has signalled a pause to the rate cut cycle. The combination of higher yields overseas and improving global risk sentiment is a negative combination for the yen.”