"There is very little on in Japan this week to drive the JPY, so it will remain a function of investor sentiment. USD/JPY is one of the G10 crosses most sensitive within our FX Risk Index.

So the US earnings season will be important for the JPY and with the S&P500 trading at 18 times estimated earnings, investors will need to see some strong results to maintain this ratio.

However, as there is a general tendency of actual earnings releases to beat expectations it will be about company CEOs' forward guidance. Elsewhere, it will be about global growth conditions to drive sentiment, especially as there is limited room of major central banks such as the ECB making a case of rising liquidity expectations. The central bank announces its monetary policy this week. When it comes to growth, conditions remain muted as for instance confirmed by this week's trade data out of China.

As a result of the above outlined conditions caution may be warranted when it comes to USD/JPY. A combination of both better risk sentiment and rising US yields may be needed to push the pair higher".

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