USD/JPY: Bullish but not as before – MUFG

The bias in the USD/JPY pair is to the upside, according to analysts at MUFG Bank. They see the pair moving in the range of 110.00 and 116.00 over the next weeks. 

Key Quotes:

“We see scope for USD/JPY slowly retracing the Omicron drop on the back of an FOMC meeting confirming market expectations of a more active FOMC next year. The market could feasibly contemplate pricing more than three rate hikes next year – we don’t expect the Fed to deliver that but the initial phase of pricing such action is likely to see USD/JPY grind higher again.”

“General levels of volatility will need to subside in order for conditions to be conducive for a renewed grind higher in USD/JPY. G10 FX volatility should subside once we are through this busy week of key central bank meetings. But with year-end approaching there is a risk this move higher for USD/JPY might not happen until the new year.”

“Increased China uncertainty with additional property companies now coming under selling pressure (Shimao Group Holdings Ltd.) and the rapid spread of the Omicron covid variant suggest further reservations over the quick re-establishment of USD/JPY carry positions. Overall though, we assume the Fed induced demand for dollars will help lift USD/JPY although our bullishness is somewhat lower than in previous months and the move higher may be curtailed to a degree by broader volatility and elevated levels of uncertainty globally.”