Key for FX markets next week is whether oil prices will fall, as there may still be scope for the downside even when prices appear to be supported around $42, according to Naohiro Nomoto, manager of FX trading at Bank of Tokyo- Mitsubishi UFJ.
* A drop in WTI oil below $40 may spark selling in stocks and weigh on yields and USD/JPY for a couple of days
* U.S. core PCE report and oil prices are in focus next week, although they are unlikely to be the catalysts that bring USD/JPY out of recent narrow ranges
** Strong core PCE could push 10-year U.S. Treasury yield to test 2.2%
* Positioning in USD/JPY is light as interest is lost with the pair sticking to narrow ranges
** Expects USD/JPY in 109-112 range with plus/minus 0.5 yen up and down next week
Source: Bloomberg Pro Terminal
Trader I. Ivanov
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