USD/JPY remains within 100-105

Since July of a 75% probability of the USD/JPY dropping under 100. However, the USD/JPY broke out in an upward direction from a triangle flag pattern in October, and downward pressure temporarily eased. That said, if asked to compare scenarios of a move above 110 or a drop below 100, we still see a higher likelihood of the latter. However, 100 demonstrated relatively firm support with concentrated buy orders from pension funds, life insurers, and other investors and importers. Technical downward momentum receded as the rate was unable to break through 100, and overseas speculators were forced to unwind USD/JPY shorts and this resulted in USD/JPY rebounding to the 105 level. The USD/JPY recovery is also in line with the recent rise in US interest rates. We expect an increase in buyers in the low 100 range and stronger possibility of avoiding a drop below 100 if the US economy is bottom-firm and this fosters expectations for multiple rate hikes by the Fed for coming months. The USD/JPY's central level might shift to 105-110 in this case. We maintain our view that the USD/JPY's core level is likely to stay at 100-105, and the potential risk of moving toward the 90 range into 2017 remains significant.