Head of Market Strategy at Westpac Robert Rennie noted the now neutral stance on the pair in the near term horizon.
“A couple of weeks ago we switched to ‘modestly negative ¥ bias’ on the basis that weight of money would likely see 105 broken but little follow through momentum. That view pretty much played out with the pop above 105”.
“However, last week’s FBI bombshell has seen us quickly flip back to a neutral bias. USD/JPY will have a high beta to the election result. A Trump victory would see 100 give way; Clinton could see 105 broken and some”.
“Given the significant tail risk, we will stick with a neutral bias for USD/JPY for the week ahead though maintain a 105 one month target on a base case Clinton win”.