Bank of America Merrill Lynch Research argues that as USD/JPY is driven by real yield spreads, policy divergence remains a key determinant of major JPY crosses.
In that regard, BofAML's view is that the Bank of Japan will keep its yield curve control at the current form for the rest of 2017.
Meanwhile, BofAML thinks that following last week's FOMC meeting, USD/JPY may have difficulty re-establishing its bull trend near-term.
…"But we continue to carry upside bias and remain long USD/JPY based on flow and macro arguments," BofA advises.
BofAML maintains a long USD/JPY position targeting 120 as structural recommendation in its macro portfolio.
USD/JPY is trading trading circa 112.40 as of writing.
Source: Bank of America Merrill Lynch Rates and Currencies ResearchOriginal Article
