Analysts at Citibank, consider that the current consolidation in the USD/JPY pair in the range 106-108 could continue as real money and leveraged names cover shorts around major support at 106.
“First is a disappointment on Japanese fiscal. We believe the latest package is more of a relief for the corporate sector facing financing stress rather than a so-called stimulus. This has then evolved into expectations that the BoJ will cap any meaningful upward pressure on the JGB yields, at a time UST yields have begun to rise,keeping JPY soft. Second, elevated correlation coefficients suggest V-shaped equity market performance may be doing the heavy lifting for now. Whilst the broad $ underperforms, we likely see USDJPY more rangebound over our forecast horizon.”
“USDJPY monthly close below pivotal level 105.99 would complete a bearish outside month confirming further downside towards the converging lows around 104.56 followed by 101.19.”