TD Research discusses USD/JPY outlook and trading strategy around this week's BoJ meeting and adopts a sell-on-rallies bias.
"The current market setup and levels of the major currencies also offer attractive levels to think about trades for the fall. For the BoJ this week, we would use any rallies in USDJPY as selling opportunities...We target a move back below 110 in H2," TD advises.
'We don't think the BoJ will deliver any meaningful policy shifts, though the policy cat is out of the bag and the next move for the BoJ is less rather than more stimulus.
Besides the asymmetries of the BoJ's monpol toolkit moving forward, USDJPY looks overvalued and overbought. Our gauges of LFFV sit around 100 while shorter-term positioning indicators signal a well-populated long (USD) trade," TD adds.