NAB Research discusses USD/JPY outlook and maintains 113 as its target for Q1-end.
"Judged by our simple USD/JPY fair value model (a function of 10y USTs, the Nikkei and gold) the pair is starting to look expensive, though is still trading within its fair value range. The move higher in 10yr UST yields has boosted fair value, as has the modest rise in the Nikkei. Gold has been fairly flat so impact on the model value has been negligible," NAB notes.
"Japan’s unrelenting appetite for offshore securities, alongside reports of life funds reducing their hedge ratios on offshore bond investment, has remained a supporting factor for USD/JPY. Technically as well, the break above the 100DMA now opens a bit of blue sky for USD/JPY to trade higher. The downtrend line coming from the 2015 highs suggests next key resistance is around ¥113, which happens to match our end Q1 19 forecast for the pair," NAB adds.