Credit Suisse discusses USD/JPY outlook and sees limited scope for sharp moves below 105 under the current market conditions,.
"Last week we outlined our reasons for expecting a period of consolidation in G10 FX, having previously been mostly USD bearish for around 3 months, keeping our key near-term forecasts unchanged (EURUSD 1.18, USDJPY 105, AUDUSD 0.72).
We highlighted factors such as extreme short USD positioning, consensus greenback bearishness and a relative shift in new negative surprises on the Covid news front away from the US and towards other centres such as the EU and Australia. The debate around US fiscal stimulus also seems to be (very slowly) moving in the right direction towards an acceptable deal, with Senate majority leader McConnell saying he’s ready to support a package despite seeing “some problems with certain parts of it”, removing some USD-specific risk against other currencies in the process," CS notes.
"In the case of USDJPY, we argued that as long as US equity and credit markets remain well behaved, it is hard to see moves below 105 being extended," CS adds.