MUFG Research discusses USD/JPY outlook and highlights a number of factors that suggest caution is warranted over the scale of further moves higher in USD/JPY.
"Firstly, technically, we are approaching a key resistance point – the downward trendline from the 2015 peak and the peak last year comes in between 109.00-109.30 over the coming weeks and is likely to be tough to break. Secondly, TFX retail margin flow data indicate heavy selling into this rally which could become a bigger influence on the approach of this technical level and the psychologically important 110.00 level," MUFG notes.
"The factors above will likely exert themselves on limiting the scope for further gains to the upside for USD/JPY. Levels between 109.00 and 110.00 could well prove to be the top for this current rally in USD/JPY," MUFG adds.