USD/JPY: Turning Bullish Here Targeting 114.50 Against The Lower Bound At 111
USD/JPY has traded in a narrow range at the 112 level this week, ahead of the USJapan summit Friday. USD/JPY has been under downward pressure from seasonal JPY cash repatriations and fewer JPY short positions by speculators. Still, the lower bound for USD/JPY has been confirmed to be around 111.
USD’s momentum will depend on any statements by President Trump or Fed Chair Yellen, who will speak before Congress next week (Feb 14-15). This could be a key trigger for USD strengthening.
The US-Japan summit may not support JPY strengthening much. Some policy proposals could encourage Nikkei stock purchases, which would support a higher USD/JPY. Japan releases GDP figures for 2016 on Feb 13, and we expect positive growth driven by capital expenditures.
Seasonal JPY purchases could weigh heavily on USD/JPY, with topside around 114.50. BoJ Governor Kuroda has struggled with managing expectations for his yield control operations and this could fuel volatility for USD/JPY, along with JGB purchases. The BoJ has made frequent purchases of 5Yr-10Yr tenure JGBs recently, which were not in the original purchase plans for February.