ANZ recommend selling USD/JPY at.........>

DOLLAR-YEN: ANZ recommend selling USD/JPY at 110.96 with a stop at Y112.50 and

an initial target of Y107.00.

- ANZ point to "increased risk that USD/JPY weakens from here, as long USD

(short JPY) positions neutralise. While 3-months implied vol. in USD/JPY has

risen somewhat since last week, we think it looks too low, given the risks over

the next weeks. Importantly, valuation consideration suggests heightened risk of

a reversal in USD/JPY. Our fair value model shows that USD/JPY should be much

lower and its over-valuation has reached extremely stretched levels. Finally,

geopolitics is still a focus for markets, & plenty of catalysts this week could

re-ignite concerns (not least the Manafort Trial starting on the 25th). Our

model of Japanese flow suggests risk is a key factor in explaining shifts in net

flows, the higher the uncertainty the lower the net outflows. Even from a

domestic point of view, reports that the Bank of Japan may tweak its current

policy settings at its 31 July meeting - in a way that would lead to a de facto

tightening in monetary policy - also may help drive USD/JPY lower."