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Senior Analyst at Danske Bank Morten Helt believes the pair is poised to rangebound between 110.00 and 115.00 in the   medium term.

Key Quotes

USD/JPY remains highly correlated with the 10Y US treasury yield and the combination of a neutral speculative JPY positioning and higher US 10Y yields is likely to remain a supporting factor for USD/JPY. Political uncertainty in Japan is likely to weigh on USD/JPY over the summer ahead of the Liberal Democratic Party’s (LDP) leadership election in September, and we expect USD/JPY to trade within the 108-111.40 in the coming months targeting 110 in 1-3M”.

“Over the medium term, we expect USD/JPY to remain underpinned by the continued global growth outlook and Fed-BoJ divergence, and we expect the cross eventually to settle in the 110-115 range in 6-12M targeting 112 in 6-12M”.