Nomura Research discusses the JPY outlook and likes long positions in EUR/JPY, and AUD/JPY into year-end.
"Four key events are likely to have a major impact on market sentiment and could significantly affect yen-crosses into the next week: (1) expectations that the weak second wave of COVID-19 infection in the US; (2) progress on economic stimulus discussions in the US; (3) developments between the US and China in the run-up to the video talks scheduled for 15 August; and (4) the possibility of a US Democratic vice presidential candidate announcement," Nomura notes.
"In this regard, even if market sentiment improves after the above risk events, the upward pressure on USD/JPY may remain weak. By contrast, if the Fed becomes dovish, it is likely that EUR and AUD will appreciate further against USD and JPY after market sentiment improves. Although the weaker second wave in the US and the agreement on economic stimulus measures will contribute to USD/JPY appreciation towards year-end, yen-cross long positions, such as EUR/JPY and AUD/JPY long positions, are more promising for the time being, in our view," Nomura adds.