MUFG Research discusses USD/JPY outlook and maintains a neutral bias in the near-term.
"Conditions in the financial markets were perfect for USD/JPY to move higher. Yields in the US picked up, fuelled in part by another drop in initial claims to a new cyclical low while FX volatility took another lurch lower. We highlighted this in March but then a sudden lurch higher in volatility fuelled a sharp drop in USD/JPY to the 110.00 level. The yield per unit of volatility is higher again and the moves fuelled fresh USD/JPY buying. But we’re not convinced there will be much market conviction in buying USD/JPY with 112.00 likely to remain strong resistance," MUFG notes.
"There are few policy events coming up in the near term, and we expect slow trading flows ahead of the Golden Week holidays," MUFG adds.