Saying that the decline in USD/JPY may be limited due to higher Treasury yields and US stocks, although gains are expected to face a hurdle above the 109.00 level. The firm expects the pair tot trade within a range of 108.20-90 today as traders seek fresh direction.
They argue that short-term positions in USD/JPY appears to be neutral at the moment, adding that geopolitical tensions in the Middle East and any comments by Trump on the dollar itself or trade could be risk factors but argues that markets will focus more on Fed remarks and US data before the next FOMC meeting.
The firm anticipates USD/JPY to trade within a range of 108.00 to 109.00 in the next week and may head towards either 107.50 or 109.50 - although saying that markets will generally struggle to find a clear direction.
It may seem a bit dim at first glance to see a call on both sides of the pair but such is the situation market participants are faced with right now. The bond market isn't really buying into the story that the Fed is seeking a more aggressive easing path just yet and are hoping that the "insurance rate cut" is enough to spur inflationary pressures.
That's one argument as to why Treasury yields are holding up in the midst of all this rate cut talk and is a supportive factor for the dollar.
However, ultimately it will come down to what markets choose to focus on ahead of the FOMC meeting, if data comes in softer there's still scope for the dollar to weaken and that could counteract the movement suggested by Treasuries.
In short, it is looking like things will stay choppy ahead of the FOMC meeting and there's good reason to expect that as markets weigh between an "insurance rate cut" decision or potentially the start of a more aggressive easing cycle by the Fed.