Bank of Tokyo-Mitsubishi - "we are maintaining our current view that USD/JPY will correct lower. Our three-month target of 87.00 may be a little aggressive and any further gains over the near-term may require this to be adjusted. However, as highlighted by the cross-border flow data, this move is very much speculative driven on BOJ policy expectations and if disappointment starts to set in, the yen is likely to reverse course. The 5-year breakeven inflation rate in Japan has drifted higher in recent weeks while the 10yr-30yr swap spread has widened notably. Both indicate optimism in BOJ action. We will be watching market gauges like these for signs that confidence in the BOJ may be in doubt, which would be a signal of a potential rebound in the yen.
Ranges & Outlook for the week ahead:
USD/JPY – bullish bias – (92.00-95.00)
EUR/USD – neutral bias – (1.3250-1.3650)
USD/CNY – neutral bias – (6.2100-6.2500)"