USD/JPY keeps its neutral stance unchanged – Westpac

Strategists at Westpac keep the outlook on USD/JPY as neutral in the near-term, with focus on the Brexit referendum and upcoming key Japanese data.

Key Quotes

“With the end of the month approaching, we get a huge ramp up in Japanese data through the end of next week. That includes the PMI this Thursday, retail trade next Wednesday, IP next Thursday and CPI plus Tankan next Friday. It’s hard to imagine USD/JPY completely ignoring that run of data, but this seems to be the risk given the upcoming UK referendum”.

“We therefore maintain our “firmly neutral” stance on the yen. If the UK does vote Brexit, the yen should strengthen yet further and a move down through 103 looks likely. However, we would expect to see CB liquidity swap lines being opened and BoJ intervention would become more likely in such a disorderly move”.

“On the topside, the lack of bounce through 105/105.50 even with the improved polling in the UK in the last few days suggests that a Remain bounce may be capped. However, we would expect to see a move above 105.50 through the weekend. All eyes on Brexit then and let’s think about next week’s data next week”.