Credit Suisse discusses USD/JPY outlook and adopts a tactical bullish bias expecting the pair to push towards the Q4 2017 average around 113 in the weeks ahead.
"For USDJPY, the break in the pair above May highs to its best levels since January is significant in our view in a climate of falling volatility with another six weeks of summer holiday season to go.
The market continues to absorb the impact of trade war fears without significant impact on the projected Fed tightening path, allowing rate differentials to exert their influence unencumbered by fears of imminent risk. It's also the case that, even in a trade war scenario, a stronger JPY is not necessarily a guaranteed outcome given Japan's own export exposure to the US, especially in the key and highly sensitive auto sector. Finally, rising oil prices are unhelpful for Japan's terms of trade, even if they do help inflation expectations on the margin.
In this context, we see scope for USDJPY to push still higher towards the Q4 2017 average around 113 in the weeks ahead," CS argues.