What’s the setup for USD/JPY?

What's the setup for USD/JPY?

MUFG Research sees a scope for a softer USD/JPY this week.

“There is increased focus on USD/JPY which looks set to breach the 110.00-level for the first time since 6th April following sharp selling we believe was related to the MSCI rebalancing of global equity indices that saw 29 Japan stocks removed – a far larger total than is normal,” MUFG notes. 

“These temporary factors won’t last of course and hence we could see this positive momentum reverse this week as the USD demand fades. USD/JPY does look more elevated on % change terms than DXY. But the broader backdrop going forward is favourable for the yen to remain weak, although we would emphasize depreciation is likely to be more pronounced versus non-dollar currencies and we must also be mindful of the inevitable disruptions to risk going forward that will likely result in some sharp reversals and periods of yen strength,” MUFG adds.

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