USD/JPY: Struggle to extend far beyond 109.00 – Westpac

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.”