USD/JPY: The trend is for yen appreciation – MUFG

Analysts at MUFG Bank, continue to see that the main trend in the USD/JPY points to a stronger yen. They see the pair trading between 104.50 and 107.50 next week. 

Key Quotes:

“Traders could take a wait-and-see stance ahead of the Kansas City Fed’s economic forum in Jackson Hole, Wyoming, next week. But falling US yields are keeping USD from gaining strength, and yen-buying driven by risk aversion also means big downside risk for USDJPY. USDJPY did dip to 105.05 at one point. Exporters and foreign bond holders (redeeming bonds) will be repatriating funds, and yen-buying flows could lead to USDJPY testing below the 105 level.”

“All eyes at Jackson Hole will be on whether Fed Chair Jerome Powell changes his stance. He had indicated after the July FOMC meeting that an easing phase has not begun, and further rate cuts are not likely. If he takes on a more dovish tone in August, US yields could decline and USD weaken. Headline risks surrounding the US-China trade war will also bear watching. Market liquidity is thin in August, and an unexpected big movement like the ‘Flash Crash’ over the New Year holidays, is a possibility.”