MUFG Research discusses USD/JPY technical outlook and maintains a bearish bias in the near-term, expecting the pair to trade downward in a 111-108 range.
"Though US President Trump’s State of the Union speech this week did not include any particular surprises, we will be watching US budget talks and fiscal spending plans as well as US Treasury issuances.
In Japan, the FY18 second supplementary budget was passed by the Diet today. The Government is showing increasing inclination to expand spending, including with the FY19 budget. Fiscal spending is flourishing, not only in Japan and the US, but also in China," MUFG notes.
"Underlying JPY buying flows may be prevailing at present, but different extents of fiscal expansion among countries will FX valuations via interest rates. The consensus forecast for Japan’s 4Q GDP growth, to be released 14 February, is 1.4% annualized, but fiscal spending is likely to expand ahead of the sales tax hike this October," MUFG adds.