NAB FX Strategy Research notes argues that the BoJ policy is unlikely to change in the foreseeable future including the current commitment to YCC, USD/JPY sensitivity to movements in US Treasury yields will remain elevated for some time to come.
“On this, our rate strategists note the tendency for 10-year Treasury yields to rise ahead of both the December 2016 and March 2017 Fed rate hikes – and with that USD/JPY. The Fed looks on track to hike in June, subject to key upcoming data releases (payrolls, ISM and CPI),” NAB notes.
“We retain our bias for US data and inflation in particular to recover and assuming no further rise in US political risk, we remain as comfortable as we can be with our ¥114 USD/JPY target for June,” NAB projects.
USD/JPY is trading circa 110.60 as of writing.
Source: NAB Research
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