CIBC Research discusses USD/JPY outlook and adopts a structural bearish bias targeting the cross at 104 by year-end.
With USDJPY well linked to government bond spreads in the last two years, the yen should be a beneficiary of any upward pressure on JGBs emanating from a less-dovish tone at the BoJ.
Indeed, after seeing net JPY shorts advance for five straight weeks into early May, a scenario not seen since 2016, we remain wary of recent flows running out of momentum.
That should also help fuel a correction in USDJPY, adding to ammunition from anticipated positive economic developments. Overall, we target USDJPY reaching 104 by the end of the year,” CIBC argues.