"In a fundamental sense the JPY looks set to turn.

Real rates will turn from a driver of strength to weakness, while the better commodity environment will reduce the scale of the trade surplus. The key future uncertainty is likely to be the scale of outflows. Here, the recent steepening in global rates will play a key role. In the near term our indicators of liquidity suggest volatility could remain suppressed, and as such drive further JPY weakness. We will watch our indicator closely and be alert to the risk that global curves steepen to a point which tightens liquidity and drives volatility higher. For this reason, the upcycle for USD/JPY is likely to be much more shallow than usual.

As such, we expect USD/JPY to test above 110 before seeing 100 again.

We have revised our forecasts for USD/JPY higher".

(Source: eFXplus Forecasts, ANZ)

Copyright © 2016 ANZ, eFXnews™