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Flash: USD/JPY has a neutral bias – BTMU

FXstreet.com (Barcelona) - Bank of Tokyo Mitsubishi UFJ analysts believe that USD/JPY has a neutral bias and is set to trade between 100.00 and 103.50 for the week ahead.

They begin by noting that investor turmoil returned to the global equity market today triggered by Chariman Bernanke’s JEC testimony and the FOMC minutes. Additionally they see that the Nikkei 225 plummeted by 7.3% today and general risk aversion may persist for a period. They add that JGB selling was also strong, with the 10-year yield moving up close to 1.00%. Yen short positions were liquidated under the market stress, with the yen strengthening over the 101-level.

They note that there is a risk of the risk-off theme running into next week as fears over a change in Fed policy persist. However, tapering is still someway off and Fed expectations would quickly change if volatility persisted. They write, “Hence, the equity market should calm down, resulting in a more stable USD/JPY rate. The Japanese trade account deficit, massive foreign direct investment outflows and high break even inflation rates should support the present yen selling momentum.”

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