Mizuho outlines conditions for a rise in USD / JPY
The firm says the market is not experiencing a significant weakening trend for the yen at this time, but will feel more comfortable with the USD / JPY returning to the 105-110 range if the good yields the 10-year treasury rise more significantly from now on.
Adding that many exporters place USD / JPY at 105 for internal rates, which means there will likely be sell orders around that level which could cap any advance.
That said, the firm also argues that the downside risks to the USD / JPY are also diminishing, as many of those who had taken a long-term structural view on the EUR / JPY and AUD / JPY seem to be rather move to long USD / JPY positions.
The big picture is rather obvious given the correlation between the USD / JPY and 10-year Treasury bill yields over time, although it comes with a large if.
The fact that if There is a significant jump to 1.50% would signify a major focus on the reflation narrative and which could inadvertently strengthen the dollar as well, as such a surge also causes the Fed to be less accommodating sooner or later.
For now however, the USD / JPY is still caught attempting a larger breakout above 105.00, but unless the buyers can move away from the handful of numbers and move closer to 200 day moving average (blue line) @ 105.59, momentum might slow down a bit.