USD/JPY reasonable resistance lies at 106.80 – Westpac

Strategists at Westpac have noted the important resistant area around 106.80 in USD/JPY.

Key Quotes

“Near term direction for the ¥ will be driven by a number of factors including the guidance from the FOMC; how much if at all the BoJ increases the asset purchase program/ widens out the range of assets it buys; and what the fiscal package looks like”.

“Our base case remains that it will be hard for the BoJ to meet and beat ‘helicopter’ money expectations”.

“On the fiscal package, headlines have tended to focus on ¥20/30tn but in all reality new expenditure is likely to be much lower than this and may underwhelm too”.

“While the FOMC statement is likely to have a more upbeat message, the Fed is unlikely to explicitly signal that Sep is live. Thus, we see risks of USD/JPY back through 103.50 and possibly 101.50. However, it remains a buy into weakness”.