Economists at TD Securities think a modest bounceback in the yen is starting to look a bit more likely. EUR/JPY looks stretched – this should weigh on USD/JPY but 112 looks to be formidable support.

There is a solid case for yen weakness

“As much as yen weakness is likely to persist over the medium-term, we think there is scope for a tactical reprieve as front-end receivers look more attractive in our view.” 

“EUR/JPY has stalled around 133, which is just shy of its cyclical high around 134.”

“Given our view on the ECB and our bias for the EUR to remain relatively soggy, a retracement to 131 seems probable. This would also coincides with the 50% retracement of the high/lows since June. This should help pull USD/JPY lower, though we are inclined to think that 112 should be rather solid support.”