JPY: Market set to continue to test the BoJ’s resolve and move below 100 - Westpac

Research Team at Westpac, suggests that the price action in USD/JPY post the Brexit slump has been horrible and a lack of verbal intervention on the drop to 100 has not helped either.

Key Quotes

“Sure, a decent rebound in payrolls may be enough to prevent a move lower this week. However, bounces are clearly just being used by the market as an opportunity to reload and sell. It looks like the market is set to continue to test the BoJ’s resolve and a move below 100 is just a matter of time. However, we remain of the view that policy lies in wait into the end of the month. The BoJ should follow the move from the ECB etc in widening the range of assets it buys. Such a move would help break the JPY/ Nikkei correlation. We maintain a neutral view at these levels given liquidity and risk concerns.

Technical: Price action in USD/JPY looks pretty soggy. The psychological 100 however should be the limit to the downside for now, especially given the speed with which USD/JPY bounced back above it.”