MUFG Research discusses tactical USD/JPY outlook and adopts a neutral bias, expecting the pair to trade in a 109-111 in the near-term.
"USD/JPY upside has been heavy since last week because of growing concerns that the trade friction between the US and China could be prolonged. Over the near term, USD/JPY is unlikely to hit the 111.00-level, with the US-Japan yield spread unlikely to widen. However USD/JPY downside firmness is clear, with the lower end only in the 109.00-level after the end of Golden Week," MUFG notes.
JPY selling is unlikely to boost USD/JPY, while the break below the 110.00-level would probably support USDJPY because Japanese investors would be expected to buy more overseas securities. Overseas bond investing flows are strong, given the dearth of investing opportunities at home. USD/JPY will probably not be moving much either way through the end of May," MUFG adds.