Comments from PM Abe , MOF and BOJ minutes that we observed in the Asia session were much of the same but once again markets digest the information as "actionless" as we have heard one too many times about the JPY govt/ BOJ's willingness to intervene in FX markets "if need be" yet their policy fails to back up such claims. Further in all honesty the BOJ has only ever intervened in the $yen price in recent times (post 2008) when it has been less than 90, and closer to 80 - so in reality imo we have until atleast 94 before we have to worry about any potential intervention spikes.
My view on $Yen remains , with broad USD strength today helping $yen rise into the 101.5 level which it has failed to break so far - i expect $yen to test this level several more times today - failure to break and i will short OR i am happy to short at the 102 level which is likely to be very restrictive anyway. Targets to the downside are 100.5 and 100, then 99.
Through 99 we look towards the 94 level. a Push here will require the risk-off tone of 2016 to continue to dominate this half of the year too, whihc seems somewhat likely as gold continues to rally close to yearly highs yesterday and US presidential elections, FOMC hike projections and brexit uncertainty still linger. A close below 98.5 and the clear selling target is 94 - this is my terminal forecast for $yne before any bull trend can emerge - with failiure from BOJ to diverge their policy more in the highly pressured july meeting, im struggling to see what drivers there are to move $yen higher and through the 104 key level going forward - imo a 20-30bps depo rate and LSP cut, combined with a 10-20trn JGB extension is what is require to see $Yen maintain the 110 level and be able to fight the risk-off pressures. Until BOJ policy is adapted in such a way, selling remains the bias.
1. YEN TO WEAKEN TO 103.8 TO THE DOLLAR IN THREE MONTHS, 105.0 IN SIX MONTHS, AND 107.7 IN A YEAR (VS 103.0, 105.0, 108.0 IN JULY)
JPY PM Abe highlights:
-JAPAN PM ABE: EXTRA BUDGET TO BE SUBMITTED TO DIET IN AUTUMN
-JAPAN PM ABE: ECONOMY IS TOP POLICY PRIORITY FOR NEW CABINET
-ABE: TO STRENGTHEN TIES WITH NEIGHBOURS LIKE CHINA, S KOREA
-ABE: NOT THINKING ABOUT SEEKING TO EXTEND TERM AS LDP PRESIDENT Economy
-ABE: I TRUST KURODA'S ABILITY AS BOJ GOVERNOR
-ABE: SPECIFIC STEPS UP TO BOJ TO DECIDE
-ABE: KURODA HAS SAID THERE'S NO LIMIT TO BOJ'S
JPY MOF's Asakawa Highlights
-JAPAN MOF'S ASAKAWA: IF NEEDED, READY TO ACT ON JPY IN LINE WITH G-7 AGREEMENT
-JAPAN MOF ASAKAWA: INTEREST RATES, CURRENCY MARKET ARE VOLATILE
-JAPAN MOF ASAKAWA: CLOSELY WATCHING FOREX MARKET MOVES
-JAPAN MOF ASAKAWA: CLOSELY WATCHING FX MARKET TO PREVENT SPECULATIVE MOVES FROM BECOMING ACTIVE
-JAPAN MOF ASAKAWA: FOREX MARKET SHOWING ONE-SIDED AND SPECULATIVE MOVES
-JAPAN MOF ASAKAWA: WILL RESPOND TO CURRENCY MOVES IF NEEDED IN LINE WITH G7, G20 AGREEMENT
-JAPAN MOF ASAKAWA: Recent Rise In JPY Is 'Quite Biased, One-Sided, Speculator-Driven'
-JAPAN MOF ASAKAWA: JGB Yield , JPY FX Rate Is 'Very High'