USD/JPY: bullish, with caution towards 113.00 - Scotiabank

In respect of USD/JPY, analysts at Scotiabank explained that sentiment appears dominant, and they highlight JPY’s vulnerability to knee-jerk haven-driven gains in periods of risk aversion.

Key Quotes:

"JPY’s early Asian session rally had been remarkably aggressive, pushing toward 1.4% in the first few hours of trade."

"Near-term risk is elevated as U.S. participants return from last week’s holidays. Yield spreads are showing signs of stabilization, short term measures of implied volatility are climbing, and risk reversals suggest a notable turn and broad rise in the premium for protection against JPY strength (USD/JPY downside) across a range of time horizons."

USD/JPY short-term technicals: bullish, with caution:

"USD/JPY’s technical signals remain broadly bullish however most appear extended and hint to the potential for near-term consolidation. Negative divergence had been observed on the shorter-term (hourly) charts. Near-term resistance is expected at 113 and support has been observed at 111.50. "