Bank of America Global Research discusses USD/JPY outlook and maintain a structural bullish through year-end.
"A mid-cycle rebound in US yields would be negative for JPY. The recent corrective rally in JPY and the decline in US rates since April are analogous to 2017 when we saw a correction in US yields and USD/JPY through the summer. Our technical strategist Paul Ciana argues US 10-year confirmed a bottom and sees a number of similarities to 2017. While much depend on the pandemic development from a fundamental perspective, flow, seasonality and political schedule suggest September as a potential turning point and we expect JPY to reinstate its weakness," BofA notes.
"We expect USD/JPY to rise to 116 by year-end. Above 115, the BoJ would be incentivized to proceed policy normalization while 105 would be bought by public pension funds," BofA adds.