Analyst at Danske Bank Mikael Milhoj sees the pair climbing towards the 115.00 handle in a 3-month horizon. Key Quotes “On the other hand, our regression models suggest that the last months’ appreciation of the JPY is somewhat overdone, not least vis-à-vis the USD”. “According to the latest IMM Positioning report non-commercial JPY bets are now at the highest level in four years, which naturally increases the JPY’s sensitivity to the downside, especially in an environment of improved risk sentiment”. “Having said this, we are less certain that more Bank of Japan easing next month – we look for a 20bp rate cut – on a more sustained basis can weaken the JPY as BoJ is fighting gravity in terms of valuation and flows”. “As a result we see the upside potential in USD/JPY as limited in the coming months forecasting the cross at 112 in 1M and 115 in 3M. On a longer time horizon we still look for more USD/JPY upside although less so than previously. Specifically we expect cyclical divergence and relative monetary policy to act as supportive factors for the cross towards a level around 118 in 12M”. For more information, read our latest forex news.