USD/JPY should continue to drift lower but....

Plenty of conflicting forces at play in the Yen pairs which should ensure volatility, but not all in the same direction.

• Rise in metal prices should stoke up some risk-aversion across financial markets which in turn is bearish for Yen crosses.
• But, pairs like EUR/JPY and AUD/JPY are still looking technically constructive so no need to panic sell there.
• The USD is falling out of favour again with tapering on the back burner, and with the market sitting long USD already we may see more profit taking ahead of the August holiday period.
• But, yesterday’s election gave the Japanese PM a mandate to continue with expansionist monetary policy which will be Yen negative.

The strongest of these 4 factors in my mind is the pre-holiday positioning, so I’d expect to see a slow, sideways/lower drift over the coming weeks.