TD Research discusses USD/JPY outlook and highlights a scope for a break lower towards 105 in the near-term.
"We have been of the view that USDJPY would consolidate in a 107/109 range. This process looks nearly matured. The negative surprise in ISM manufacturing has compelled a U-turn near 108.50. We think that if ISM services also slips this week, the range is liable to break lower. This would open a move back to 105," TD notes.
"The report that the GPIF will reclassify its hedged portfolio as domestic holdings suggests they have more room to buy unhedged foreign bonds - and reduce the need to up JGBs. This should imply 10yr UST-JGB spread compression and anchor USDJPY lower," TD adds.