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USD/JPY: Bearish bias but correction to be reversed - BTMU

FXStreet (Córdoba) - According to Derek Halpenny, European Head of Currency Strategy at the Bank of Tokyo Mitsubishi UFJ, the short term outlook is titled to the downside in the USD/JPY pair, but a correction is likely to be reversed.

Key Quotes:

“While there are downside risks for USD/JPY at present, we would expect the capital outflow factor to persist and that should mean that any near-term correction lower is reversed, especially given our view that broader financial market conditions should also gradually improve over the coming months.”

“Lower levels in USD/JPY will likely result in a pick-up in capital outflows and with government-related entities likely to continue to be active in diversifying domestic assets into foreign securities. But over the very short-term risks appear to be more to the downside.”

“The dollar selling has been quite broad-based as expectations of Fed tightening gets pushed further back. This may result in further yen strength over the short-term but as highlighted we do not envisage a scenario of sustained yen gains.”

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