A note from the firm's securities arm in Japan
Says that USD/JPY could be weighed down further as stock prices decline with markets more sensitive to risk-off factors after having largely priced in a likely outcome from US-China trade talks. Adding that:
"Up until last week, share prices were supported by hopes of the Fed cutting rates and optimism that trade talks will happen. But now, that's starting to lose effect. Markets have factored in the possibility of US and China continuing negotiations after the meeting between their leaders. Investors may be locking in profits on stocks ahead of the G20 summit."
The firm argues that having seen USD/JPY slip below the 107.00 handle earlier, the next target could be around 106.60 while also not ruling out a potential fall towards 106.00 and the flash crash low just below 105.00.
On the flip side, the firm says that topside in USD/JPY will be limited as the greenback is expected to trend downwards unless markets are extremely positive on developments from US-China trade talks.
