NAB Research discusses USD/JPY outlook and likes strategies for short exposure against 107 (i.e: stops above 107), expecting the pair to gradually move towards a lower 100 to 105 trading range.
"For now we remain comfortable with the idea of leaning against moves toward the ¥107 mark. In July the USD (BBDXY) recorded its fourth consecutive monthly decline and so far in August, the narrative remains unchanged with the greenback down again month to date both in index terms and against most G10 pairs. On a monthly basis, USD/JPY doesn’t always move in the same direction as BBDXY, but in a low beta fashion we still expect USD/JPY to follow the USD lower over the coming year," NAB notes.
"We see the pair gradually moving towards a lower ¥100 to ¥105 trading range. The downtrend from the ¥118 highs in December 2016 remains well entrenched and while the 10y US-Japan real rate spread relationship with USD/JPY works with variable lags. In our view a test of the ¥100 level over the next twelve months remains a good bet," NAB adds.