July 21 (Reuters) - USD/JPY is likely to remain essentially range-bound despite swings in risk sentiment, with price action contained by orders and, at times, massive option expiries. Occasionally thin trading conditions could push it into higher or lower ranges.
The current range looks to be 106.50-107.50, with Japanese importers and other players, including institutional investors, very good buyers on dips to and below 107.00. This has been the case over the past two weeks with demand for summer carry trades especially supportive.
The topside has been capped by Japanese exporters and those expecting further dollar weakness. Indeed, Monday's USD/JPY rally to 107.57 on Gotobi Tokyo fix demand and a flow related to Softbank ran into good sales.
Option expiries will also periodically helpcontain action and provide either support or resistance to spot prices. Tuesday sees $4.5 billion in expiries between 106.75-107.65 strikes and another $2.7 billion between 106.00-55. Large expiries loom next Monday too.
U.S. Treasury yields will continue to exert some two-way pressure on USD/JPY, but they remain range-bound too and argue for little FX change. Previous comment .
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USD/JPY nearby option expiries over course of week: https://tmsnrt.rs/3hmiZRy
Yield on US Treasury 10s: https://tmsnrt.rs/2WFurzK
(Haruya Ida is a Reuters market analyst. The views expressed are his own)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.