Indeed we see USD/JPY approaching a policy zone soon : The diplomacy costs of intervention (ongoing US Presidential race; upcoming G7 Summit) may still dominate at ¥105, but the domestic political costs (Japan’s Upper House elections in July) will be greater into/below ¥100 – subjective intervention probability is 30% & 70%, respectively, and that zone (50% retracement of 2011-2015) could also provide buying opportunities for long-term investors. BofAML Trading expects initial downside attempts to hold 105.23 (Oct’14 low and 200WMA) and 105.00, but remains biased to re-sell meaningful rallies. Option Desk is also biased long vol and riskreversal here (1mth implied-realized at largest discount YTD).
(BoAML)
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