USD/JPY: Little chance of a substantial break higher – Danske Bank

USD/JPY dropped to 112.6 overnight on the news that the Bank of Japan has lowered bond purchases in the long end of the curve, triggering renewed concerns that an exit to quantitative easing is drawing closer, explains Senior Analyst, Jens Nærvig Pedersen at Danske Bank.

Key Quotes

“Near term, US yields and risk sentiment are likely to remain key drivers for the cross. However, we see little chance of a substantial break higher in USD/JPY due to very stretched speculative positioning, according to the IMM, and tactically, we would consider selling USD/JPY on rallies towards 114.”