Taisuke Tanaka, Strategist at Deutsche Bank, notes that the USD/JPY slid below ¥110 last week and this is the internal base rate for many Japanese exporters in the new fiscal year. Key Quotes “They have heightened their readiness to sell the USD/JPY on any rebound. We believe resistance to a rebound has reduced the rate from ¥115 to ¥110. We expect the rate to continue to try the downside, which could further lower the resistance level to the ¥105-110 range. A comeback to ¥110-115 would require for now that Japanese market participants clear away their current USD/JPY exposure, and eventually that hopes reemerge of a US economic expansion and further Fed rate hikes. Economic indicators of note this week include US CPI (Thursday), industrial production (Friday) and the University of Michigan Consumer Sentiment Index (Friday), and China's CPI (Monday), auto sales (Tuesday), trade data (Wednesday) and GDP (Friday). However, we do not foresee a turnaround in the USD/JPY in the near future from a fundamentals perspective. As long as the yen faces upward risk, the focus for the markets is likely to be the forex interventions by Japanese authorities. Japan may seek a shared expression of concern at the G20 meeting of finance ministers and central bankers this Thursday and Friday that a strong yen could harm market sentiment not only in Japan but globally. If this proves difficult, Japanese authorities may work to avoid direct mention of the yen at G20 and lean on the US to acknowledge the need for a stable USD/JPY in order to lay the groundwork for a potential market intervention. We maintain our view that the MoF/BoJ will intervene to secure the rate at ¥105-110 level ahead of the upcoming domestic election(s), but it could be forced to shift its defense line to ¥100 depending on the US reaction. We suspect the markets will see through Japan's delicate intervention situation and expect the yen to continue to try ¥105 or lower.” For more information, read our latest forex news.