USD/JPY likely to keep falling over the coming weeks – MUFG

Analysts at MUFG Bank see scope for the USD/JPY pair to extend the decline. They consider a trade idea of a short position, with an entry levell at 106.10, targeting 103.80, with a stop loss at 107.60. 

Key Quotes:

“The USD/JPY rate has fallen sharply today and we see scope for that extending over the coming weeks. The yen is the 2nd worst performing G10 currency in July to date which given the performance of equity markets is perhaps understandable. In any case, the dollar could start to come under selling pressure related more specifically to US economic underperformance. The jobless claims data this week might be the first warning sign that the escalation of COVID in the US may start to weigh on the dollar.”

“The FOMC meeting next week is also likely to be dovish, and we see scope for downside risks for the dollar post-FOMC next week.”

“Short USD/JPY looks a safe way to short the dollar at present. The risk to short USD positions at present is the re-emergence of risk-off but USD/JPY should be least responsive to that. Finally, seasonal patterns for USD/JPY shows the coming two months as strongly biased to the downside.”