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Thursday, June 24, 2021

USD/JPY upside momentum could fade this week but yen crosses to remain weak

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What’s the setup for USD/JPY?

What's the setup for USD/JPY?

MUFG Research sees a scope for a softer USD/JPY this week.

“There is increased focus on USD/JPY which looks set to breach the
110.00-level for the first time since 6th April following sharp selling
we believe was related to the MSCI rebalancing of global equity indices
that saw 29 Japan stocks removed – a far larger total than is normal,”
MUFG notes. 

“These temporary factors won’t last of course and hence we could see this positive momentum reverse this week as the USD demand fades. USD/JPY does look more elevated on % change terms than DXY.
But the broader backdrop going forward is favourable for the yen to
remain weak, although we would emphasize depreciation is likely to be
more pronounced versus non-dollar currencies
and we must also
be mindful of the inevitable disruptions to risk going forward that will
likely result in some sharp reversals and periods of yen strength,”
MUFG adds.

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