USD/JPY: bullish, with caution - Scotiabank

JPY’s greatest near-term vulnerability lies with the broader market tone and headline risk centered on the outlook for both fiscal and monetary policy, said Eric Theoret, FX Strategist at Sctiabank.

Key Quotes

“Domestic risk is limited as we consider Monday’s local holiday and note the absence of any major data releases scheduled for this week. JPY’s greatest near-term vulnerability lies with the broader market tone and headline risk centered on the outlook for both fiscal and monetary policy. Chief Cabinet Secretary Suga has pushed back on the use of deficit bonds for funding the upcoming stimulus package. Details are expected by late July. Note that the next BoJ policy decision is scheduled for July 29.”

“USDJPY short-term technicals: bullish, with caution—both the MACD and RSI are bullish however the DMI’s have faded simultaneously and the ADX suggests a material softening in the trend. Short-term MA’s are providing confirmation to the bullish momentum indicators, with the 9 day MA (103.39) crossing above the 21 day MA (103.32). We maintain near-term caution ahead of anticipated resistance at the 50 day MA (106.25).”