USD/JPY has traded above the top of the Ichimoku cloud for the longest period since the down trend started late last year signalling that downward momentum has eased in the near-term. With risks becoming more balanced for the pair, upside could extend further towards if key resistance level at the 105.00-level is broken rising towards the 200-day moving average at just above the 108.00-level. The ongoing rebound in the price of crude oil is weighing modestly on the yen as well in the near-term both through weakening Japan’s terms of trade and supporting higher yields overseas. The recent pick-up in inflation expectations is a negative development for the yen. The price of crude oil has extended its rebound over the last week rising back above USD50/barrel. The agreement reached last month by OPEC members to begin cutting production is helping to offer more support for the price of oil in the near-term. Recent comments from Saudi Arabia and Russia that they ready to work together on limiting production has increased the likelihood that the agreed production cut will be more fully implemented. The bullish sentiment in the oil market was further encouraged by comments from Saudi Arabia’s Energy and Industry Minister Khalid Al-Falih who stated that he was “optimistic” that there will be a deal that may lift the price of oil as high as USD60/barrel by year end. Our own assumptions are not as optimistic expecting a more gradual recovery in the price of oil towards USD60/barrel by the end of next year. A quicker rebound in the price of oil would encourage a pick-up in non-OPEC oil production challenging the sustainability of higher oil prices beyond the near-term. We may need to switch to a flatter profile for the price of crude oil for next year if gains are more front-loaded into this year. Recent developments pose upside risks to our year end forecasts for oil related currencies such as the rouble and more modest downside risks for the yen. If the price of oil continues to extend its rebound into year-end, our forecast for USD/JPY to fall below the 100.00-level maybe delayed into next year.