USD/JPY: Pair to come out as one of the biggest movers in the market next week – ING

Analysts at ING argue the USD/JPY looks bearish going into next week considering the many key events ahead, and see it trading in 107.00-109.80 range.

Key Quotes: 

“After a week of gains, the JPY momentum collapsed on today’s strong US payrolls, with USD/JPY now pushing up to 109. Next week, a calendar packed with market-moving events worldwide will likely overshadow the impact of the numerous data releases in Japan (PMIs, machine orders, PPI). The US-China trade negotiations will inevitably be the key driver throughout the week: the yen will likely find support on any indication that the deal will be delayed.”

“With the regards to the UK parliamentary vote effect, we see the spillover into other currencies including yen as asymmetric, with the yen benefiting more from a non-market-friendly outcome vs the expected Conservative party victory. On the latter, the subsequent risk-on spillover should not be significant to cause material USD/JPY upside. Conversely, a hung parliament result would likely trigger a more meaninful yen appreciation. Elsewhere, the Fed is also unlikely to support JPY as it will probably hold a neutral tone whilst hitting the pause button in the easing cycle.”

“Considering that USD/JPY is the highest correlated G10 pair with risk sentiment (correlation at -0.57 with the MSCI World, in the last 3 months), expect the pair to come out as one of the biggest movers in the market.”