USD/JPY: Less dynamism for a rally at this stage  - BTMU

Analysts from The Bank of Tokyo-Mitsubishi UFJ, see a neutral bias in the USD/JPY pair for the coming days, with the price in the 103.00 - 105.50 range with limitation to the upside but also to the downside. 

Key Quotes: 

“US dollar strengthening, not JPY selling, has largely driven the recent rise in USD/JPY. Market sentiment for another Fed rate hike has not been building yet.”

“The US dollar liquidity tightness is due chiefly to new MMF regulations to be introduced in the US next week and has reinforced the short tenure yield rise in the US. This may not continue to support a USD rally, as the tightness is likely to become a bottleneck for growth.”

“JPY selling pressure may not be set to build just yet. JPY long positions at the CFTC stayed near the recent high. USD/JPY may hit the 105 level at one point because of the US dollar liquidity tightness, but there is less dynamism for a USD/JPY rise at this stage.”

“A number of issues loom for monetary policy adjustments and the direction of USD/JPY, not macro-economic factors but financial system uncertainty.”