USD/JPY neutral-bearish near term – Scotiabank

Eric Theoret, FX Strategist at Scotiabank, noted the neutral-bearish outlook on the pair in the short term.

Key Quotes

“JPY is quiet, consolidating within a remarkably tight range ahead of the BoJ policy decision. The balance of risk favors JPY strength as we continue to highlight the potential for a disappointment relative to fairly wide-ranging expectations for easing”.

“The BoJ policy decision is set to include the unveiling of the comprehensive assessment announced in July, and some rumors have hinted to the potential for a ‘reverse operation twist’ in order to steepen the yield curve and address banking sector challenges. The BoJ has disappointed on a YTD basis, in January, April and July. We look to further disappointment and anticipate JPY strength (USDJPY weakness)”.

“Momentum signals are neutral and the DMI is trendless. USDJPY has yet to break from its recent congestion range around 102, roughly bound between 101.20 support and 103 resistance. We look to a downside resolution with risk to 100, 99.50, and the June low around 99”.