USD/JPY set to reach the 117.00 by year-end – MUFG

USD/JPY has registered impressive gains seeing its strongest level since March 2017. Economists at MUFG Bank maintain a bullish bias for the month ahead. 

Yen weakness will not persist beyond the next month or two

“We are maintaining our bullish bias for USD/JPY conveyed here last month and have nudged the range one big figure higher (11.00-117.00) to reflect the prospect of Fed short-term rates potentially moving further higher, giving further upside impetus to USD/JPY.”

“The topside of our range at 117.00 ties in with a long-term trend resistance which we believe is unlikely to be breached. Monthly intraday highs from 1990 (159.30) 2015 (125.86) comes in just above current spot at around 117.00 by year-end.”

“The turn lower in crude oil prices next year that we expect (we expect the market to turn to surplus by Q2 2022) and the probability that supply constraint issues will gradually ease means some of the catalysts for yen weakness will not persist beyond the next month or two. In the meantime though and given the prospects of the US rates market to adjust further higher from here, there remains scope for USD/JPY to push further higher.”

See: USD/JPY set to advance nicely towards the 117.00 level – Credit Suisse