Forex Flash: USD/JPY looks bullish ahead – BTMU
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USD/JPY
FXstreet.com (Barcelona) - Bank of Tokyo Mitsubishi UFJ analysts are bullish on USDJPY for the week ahead.
The begin by noting that the pair has broken above key long term technical resistance at just below the 83 handle just before the Japanese elections on Sunday. The technical break has opened the door for a retest of the intra-day high from the 15th March at 84.18. They suspect that Yen selling is likely to remain in vogue heading into and initially following the election although scope for further near-term weakness is constrained by already crowded short positioning.
The latest public opinion polls point towards a likely victory for the LDP who may form a coalition government with New Komeito. It remains uncertain whether they will also be able to win a two thirds majority in the Lower House which would allow the new government to override any Upper House vetoes on bills. Securing a two thirds majority in the Lower House would reinforce investor expectations that an LDP-led government would be able to legislate to change the BoJ law and approve the appointment of a more dovish BoJ Governor weakening the yen.
The team feel that following his likely appointment as PM, Abe will reaffirm his preference for a weaker Yen and looser BoJ policy. The markets focus will then shift to who will be appointed as Finance Minister although no material change in intervention policy is expected.
They feel that the upcoming BoJ policy meeting on the 20th December which provides the first opportunity to see if pre-election rhetoric will result in significantly looser BoJ monetary policy. They expect the BoJ to expand asset purchases by a further JPY5.0-10 trillion although it will prove no game changer.
The begin by noting that the pair has broken above key long term technical resistance at just below the 83 handle just before the Japanese elections on Sunday. The technical break has opened the door for a retest of the intra-day high from the 15th March at 84.18. They suspect that Yen selling is likely to remain in vogue heading into and initially following the election although scope for further near-term weakness is constrained by already crowded short positioning.
The latest public opinion polls point towards a likely victory for the LDP who may form a coalition government with New Komeito. It remains uncertain whether they will also be able to win a two thirds majority in the Lower House which would allow the new government to override any Upper House vetoes on bills. Securing a two thirds majority in the Lower House would reinforce investor expectations that an LDP-led government would be able to legislate to change the BoJ law and approve the appointment of a more dovish BoJ Governor weakening the yen.
The team feel that following his likely appointment as PM, Abe will reaffirm his preference for a weaker Yen and looser BoJ policy. The markets focus will then shift to who will be appointed as Finance Minister although no material change in intervention policy is expected.
They feel that the upcoming BoJ policy meeting on the 20th December which provides the first opportunity to see if pre-election rhetoric will result in significantly looser BoJ monetary policy. They expect the BoJ to expand asset purchases by a further JPY5.0-10 trillion although it will prove no game changer.
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