FXStreet (Edinburgh) - According to Morten Helt, Senior Analyst at Danske Bank, the pair is seen testing higher levels in the near-term. Key Quotes “We expect USD/JPY to move higher on a 0-3M horizon supported by relative monetary policy as the Fed is expected to hike in December”. “However, we do not look for a significant rally in USD/JPY as the Fed has been priced to a large extent. We target 124 in 1M and 124 in 3M”. “Given the relatively few prospects of additional BoJ easing in the coming 12 months, we expect USD/JPY to be caught in a 120 to 125 range longer term”. “Relative monetary policy will indeed remain a supporting factor for the cross but increasing headwinds from the significant JPY undervaluation are likely to cap the cross”. “We target 125 in 6M and 12M. Importantly, we still think that the risk of a considerable decline in USD/JPY is limited as we would expect strong policy support from the BoJ in such a scenario and thus tail risks remain skewed to the upside for USD/JPY”. For more information, read our latest forex news.