MUFG AUD/JPY trade opened at 111.20 with a target at 114.50 and a stop loss at 109.20, as the bank said fundamentals should drive the yen more than intervention.
The bank used the new long AUD/JPY position to show its view on yen direction after joint intervention by the United States and Japan. MUFG said the weaker-than-expected July payrolls report released Friday may help the intervention in the near term. However, it warned clients not to treat intervention as the main force behind the yen’s next move.
MUFG AUD/JPY Trade Reflects Yen View
MUFG said past episodes show that intervention alone did not create a lasting turn in USD/JPY. Instead, the bank said the pair later revisited or broke initial intervention levels in 1995, 1998 and 2011. Only after a broader shift in fundamentals did a durable change in direction take hold.
The bank said that pattern matters for traders with broad yen exposure. As a result, MUFG sees intervention-led yen strength as a move that may fade unless rate gaps or growth data shift in a real way. It added that softer US fundamentals now offer a more credible path to lower USD/JPY over time.
History and Payrolls Shape the Call
MUFG pointed to 1995, 1998 and 2011 to support its view. In 1998, the bank said a 75 basis point cut in the Fed funds rate between September and November led to a sharp fall in USD/JPY. In 2011, MUFG said record unilateral Japanese intervention in October, along with Shinzo Abe’s arrival as prime minister in late 2012, later pushed the pair higher.
Applying that framework now, MUFG said any decline in USD/JPY should come more gradually than the 1998 reversal. Meanwhile, the bank said the July payrolls miss strengthens the case that US fundamentals are softening. Therefore, MUFG told clients to watch incoming US data more closely than intervention headlines when judging where the yen may head next.
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Source: InvestingLive
