Watch news flow in USDJPY
USDJPY is trading back above 100, fully recovering from the sell-off after yesterday’s weaker ISM report. USDJPY will trade as a function of US data and expectations for PM Abe’s announcement of the “third arrow” of his economic plan on Wednesday. Reports suggest PM Abe will present plans for special economic zones, but may also urge a review of the investing strategy of Japan’s pension funds to increase allocations to Japanese equities and overseas assets as a part of the growth strategy. Reportedly, a panel is to be set up by July to review the investment allocation of pension funds, who have to date placed the bulk of their portfolios into JGBs. Japanese equities will be sensitive to any such news; a more positive tone for the Nikkei should weigh on JPY. Our technical team notes that 98.62 is now key support on USDJPY which needs to hold to maintain scope for a rapid recovery.
Read full report: FX Daily
BNP Paribas