USD/JPY bearish/neutral near-term – Scotiabank

Eric Theoret, FX Strategist at Scotiabank, noted the pair’s outlook stays tilted towards the neutral side in the short-term.

Key Quotes

“The broader tone remains dominant and risk is elevated into this weekend’s French election. Risk reversals have moderated on a week to date basis, softening the premium for protection against JPY strength. JPY remains vulnerable to knee-jerk, haven-driven gains in periods of risk aversion. Fundamentally, the outlook for JPY remains bearish and spreads have shown signs of stabilization following their recent (JPY-supportive) narrowing. Thursday’s comments from BoJ Gov. Kuroda maintained expectations for exceptional policy accommodation, signaling no change ahead of next week’s meeting”.

“Bearish momentum signals continue to soften, bearishly aligned DMI’s are fading, and Thursday’s USDJPY close was the first above the 9 day MA since late March. This week’s chart hints to early signs of a shift in trend with a sequence of higher lows and higher highs, with Thursday’s high clearing prior near-term resistance in the 109.20 area. The 200 day MA (108.91) remains a key level of support, and we look to gains through 109.50 toward 109.80 and 110.50”.