USD/JPY: Neutral bias, yen to maintain funding currency status – ING

Analysts at ING, see the USD/JPY pair trading with a neutral bias the next week and expect it to move in the 108.10/109.50 range. Their one-month target is 108.00.  

Key Quotes:  

“After some recent sharp dislocation, the Japanese Government Bond market looks a little more under control – helped by a rally in US Treasuries. The BoJ probably doesn’t mind the JGB sell-off too much, given its preference to steepen the yield curve and help the local banking system. Barring a surprise break-down in US-China trade negotiations, we see the coming week as a reasonably benign one – meaning that USD/JPY should be range-bound to slightly higher. True the US data has been softening a little, but the industrial slow-down is well-priced and, so far, the US consumer (like consumers elsewhere in the world) is holding up quite well.”

“Locally Japan sees October trade data and also the national CPI figure for October. The latter is rarely a market mover and the core rate, expected at 0.4% YoY, is still miles away from the BoJ’s target. Equally, the market doesn’t really believe the BoJ’s threats to take rates more negative – in fact, the BoJ has led the way in the tiering of deposits to protect the banking system from negative rates. In all, we expect a range-bound USD/JPY and the JPY to maintain funding currency status.”