Bank of Tokio-Mitsubishi - "USD/JPY – neutral bias – (87.50-91.00)
EUR/USD – bullish bias – (1.3200-1.3500)
USD/CNY – neutral bias – (6.2100-6.2300)
USDJPY: The week ahead will likely prove key for yen direction in the near-term with the BoJ expected to officially change its policy framework from the current “flexible” inflation targeting to “full-fledged” inflation targeting. As a result of behind the scenes bargaining with the government, we expect the BoJ to raise its inflation target from 1.0% to 2.0% bringing it into line with other major central banks. It will likely be a “full-fledged” inflation “target” replacing the “flexible” “goal”. The time frame set to achieve the target is unlikely to be calendar specific rather a vague deadline such as the “medium-term” is more likely. The “full-fledged” 2.0% inflation “target” will increase pressure upon the BoJ to ease monetary policy further in a more aggressive manner given that inflation is currently projected to fall well short of 2.0% in the medium-term. The development will likely initially serve to reinforce concerns amongst yen holders over the potential scale of BoJ easing ahead reinforcing the yen weakening trend before doubts build over its ability to meet the new target effectively."