MUFG Research flags a scope for a sustained move lower in USD/JPY over the coming weeks.
"The US dollar has remained at weaker levels overnight with further losses mainly concentrated against the yen which has outperformed more broadly. It has resulted in USD/JPY moving closer towards the bottom of its current trading range between 106.00 and 110.00 that has held for the majority of time since last May. The pair has remained remarkably stable over this period except for during the most intense period of the initial COVID shock in March," MUFG notes.
"However if the US dollar continues to weaken more broadly, we would expect USD/JPY to start to come more downward pressure as well going forward. The dollar index broke below the March low yesterday taking it to its lowest level since the autumn of 2018. It increases the risk that USD/JPY could soon break out below the 106.00 to 110.00 range," MUFG notes.