USD/JPY bullish, with caution  - Scotiabank

Eric Theoret, Strategist at Scotiabank, notes that USD/JPY short-term technical view remains bullish, but with caution with resistance expected at 111.50 and 112.

Key Quotes

“JPY is up 0.3% from Friday’s close and strengthening into the NA open, supported by the broader theme of USD weakness. Disappointing trade figures were largely ignored and comments from BoJ board member Masai hinted to confidence in the recent fixed-rate operations. JPY is once again trading in tandem with interest rate differentials and the 2Y U.S.-Japan yield spread remains elevated at post-crisis highs just under 125bpts. Risk reversals are aggressively fading the premium for protection against JPY strength, leaving JPY vulnerable to further downside.”

“USDJPY short-term technicals: bullish, with caution—momentum signals are bullish and DMI’s are providing confirmation. Shortand medium-term MA’s are aligned in a bullish manner as USDJPY tests fresh multi-year highs above 111. Near-term resistance is expected at 111.50 and 112. Support is expected at 109.”