NAB FX Strategy Research discusses USD/JPY outlook and remains cautiously optimistic retaining its view for USD/JPY to end the year closer to 116, but thinks the near term outlook remains somewhat challenging.

“Technicals are currently bearish, with a series of lower highs recorded last week and several attempts to move above ¥114 proving to be inauspicious. Jitters in the US high yields market is now a new source of concern for risk sentiment. Putting it all together, at least near term USD/JPY’s path of least resistance is down rather than up,” NAB notes.

Looking further ahead, NAB argues that the macro picture remains supportive for risk assets and USD/JPY.

Recent wobbles in equities and high yield credit still look like a correction rather the beginning of a broad based rout. Thus at this stage we would treat moves sub ¥113 in USD/JPY as a buying opportunity, particularly if 10y UST yields hold above 2.27%,” NAB adds.

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