Get started

Boj

BoJ watch - a traders' guide to JPY moves on the day As detailed in the BoJ meeting preview yesterday, the market is on edge for significant movement – case in point, USDJPY 1-day implied volatility (vol) currently sits at 49% - for context, this equates to a 279-pip move (higher or lower) on the day (with a 68% level of confidence), where the market feels fairly confident the upside should be contained into 131.00. You can see the implied volatility (vol) matrix, which uses 1-day option implied volatility, and we assess the expected move derived from this vol – essentially, it replicates the straddle breakeven move, which is what options traders use as a quantitative guide for movement, which they can then buy and sell vol accordingly. As a spot FX trader, I can use this to understand expected movement over a set period, which can dictate the market regime I trade in intraday – it also helps guide my position size and whether I even hold positions at all over news. When we see vols so incredibly high, it would be a surprise if this meeting proved to be a non-event, which is a debate I’ve been having with clients – the question for me is what scenario is 1) most likely 2) what is the ‘pain trade’? I list the expected policy measures below which have been widely touted as the most likely responses to be seen today. My own view is the BoJ YCC (yield curve control) program is on borrowed time – there is rising political pressure against it, the market is forcing the BoJ to buy unsustainable levels of bonds daily and Japan has a rising inflation problem that is seeing the fair value of JGB’s yield rise. My own view is the most likely action is that we see no. 1 enacted, with the YCC band rising to 1%, subsequently giving them more time to fully abolish YCC in the months ahead. However, I acknowledge the chance of no. 5 or 6 is also high. The big moves in the JPY, JPN225 and JGBs come if we see no.4 or 6, with no. 5 also offering big potential movement. The pain trade is likely seen in no.6 (no change at all) – given expectations, positioning (the market is heavily short JGBs and long JPY), and options traders short delta exposure – if that plays out the JPY could get smoked. Recall, the main policy shifts we could see are: 1. To widen the current 10-year JGB cap again, to 0.75% or 1% from 0.5% 2. To shift the target JGB yield from the 10-year JGB to the 5-year JGB. 3. To raise the 10-year yield target to 0.1% from 0% currently 4. To terminate and close off the YCC program completely 5. To terminate the YCC adding a temporary QQE program and a commitment to provide two-way liquidity 6. To leave the policy unchanged So, for those involved today keep your eyes peeled for headlines from 12 pm – it could get a little crazy. After pegging the JGB market for seven years, we typically get vol when we move away from a well-trodden regime.
by Pepperstone
Implied volatility screams higher ahead of the BOJ meetingOvernight implied volatility has risen sharply higher for yen pairs ahead of tomorrow’s Bank of Japan (BOJ) meeting. In fact, they now sit at their highest level since Brexit, which saw some yen pairs produce double-digit percentages moves (to the favour of the yen) following the infamous vote. Why are traders on edge ahead of tomorrow’s BOJ meeting? The BOJ surprised market in January by doubling their target band of the 10-year JGB from +/- 0.25% to +/- 0.5% ‘around’ zero. Given they had denied for months they would exactly that, it quickly led to speculation that the BOJ are now veering away from ultra-loose monetary policy, and this was just an important first step. But things are never straight forward with the BOJ as there are several moving parts for their policy, so we’ll take a look at some potential scenarios. The BOJ could abandon YCC (yield curve control) There is a growing expectation for the BOJ to either widen the band (to 0.75% or 1%) or scrap it all together. On one hand this is plausible as Kuroda finishes his 10-year term in April, and he may want to provide a smooth transition to his successor. But the BOJ have already proven they don’t need a meeting to announce such a move, as we saw on the 3rd of January. And do they need to widen it so aggressively twice in the same month? Personally I suspect the BOJ are unlikely to widen their YCC further, given the increased levels of volatility it has caused for Japan’s bond markets over the past few weeks. Furthermore, this seems to have quickly become a consensus view – and the BOJ don’t have a great record of playing along with the consensus. And this leaves the yen to a broad sell-off (stronger USD/JPY) if they keep YCC in place. Could the BOJ raise interest rates? I suspect this to be a very low probability event, but take nothing for granted with the BOJ. Also, it is the low probability event which spark the largest reactions, and a surprise hike to zero or higher is likely to send USD/JPY lower, along with the Nikkei 225. But as the year progresses there’s a much greater chance that the BOJ will revert to ZIRP (zero interest rate policy), and if inflation remains elevated they could even raise rates to 0.1% or 0.2% further down the track. Perhaps a form of QT (quantitative tightening)? Assuming the BOJ intend to scrap YCC before Kuroda exits (but it is not announced tomorrow), a potential first step would be to limit the amount of JGB purchases in the January meeting before wrapping it up at their March meeting. The BOJ could switch to an inflation target ‘range’ Not many are discussing this that scenario, which is partly why I like it. I don’t think the BOJ will scrap their inflation target all together, but they might announce a target range of 2-3%. We know that the PM has been calling for more flexibility with the inflation target, and this seems like a plausible compromise from the BOJ. Yet this is a scenario to plan for as it gives the BOJ greater wriggle room with their policy – so may provoke a less directional response from markets. Overnight Implied Volatility levels for USD/JPY At the time of writing, overnight implied volatility has risen to ~340 pips above or below 128.95, which provides a range of 125.14 to 131.84. 1-week IV is a whopping 900 pips and the 1-month has blown out to 1874. So traders are clearly taking this meeting very seriously. It is worth noting that implied volatility is not a precise target and essentially tells us options traders estimate with ~68 probability of prices closing within the implied range. Furthermore, I have noticed a tendency for markets not to reach the suggested upper or lower bounds of the range when IV explodes like it has today. This could be because markets are now fully prepared for a large event and much of the shock factor has been priced in. Implied volatility was low ahead of the BOJ’s surprise announcement on the 4th of Jan, but much higher after the event (and the same can be said for Brexit). With that said, it is likely to be a volatile event regardless even if not as volatile as the IV’s currently suggest. Either way, risk must be managed accordingly – even if it means not trading the actual event. USD/JPY 4-hour chart Prices have retraced against the bearish trend on the 4-hour chart. If prices continue to drift higher I doubt it will have the legs to reach the 130 resistance zone ahead of the meeting, but we may see further bearish interest as we get close to the meeting with expectations for a hawkish meeting remaining high. • With several upper wick forming on the 4-hour chart then bears could consider fading into minor rallies into the highs with a loose stop, to anticipate a move lower ahead of the meeting. • Trading around the actual announcement may prove futile given the potential for volatility and the spread blowing out. • But once the dust has settled and traders get a clearer picture of what the BOJ have done (or not), it would be a cause of deciding if the meeting was hawkish (USD/JPY bearish) or dovish (USD/JPY bullish) relative to high expectations of the former.
by CityIndex
USD/JPY ends nasty slideUSD/JPY is in positive territory on Monday. In the North American session, USD/JPY is trading at 128.50, up 0.52%. The yen had an excellent week, climbing over 3% and trading at levels not seen since May 2022. The Bank of Japan holds a two-day policy meeting on Tuesday and Wednesday in what could be one of the highlights of the week. BOJ meetings were traditionally sleepy affairs that usually maintained the Bank's policy settings. That has changed and the December meeting roiled the markets after the BoJ unexpectedly widened the band around 10-year JBs to 0.50%, up from 0.25%. The dramatic move has raised speculation that the BOJ could be planning additional policy changes at the upcoming meeting. The 0.25% cap on 10-year yields was breached on Friday and again today. The central bank has responded by buying over 2 trillion yen worth of JGBs but there is talk that the Bank could further widen the band to 0.75% or even abandon its yield curve control (YCC) policy completely. The yen has gained 14% against the US dollar since November, adding pressure on the BoJ to tighten its ultra-loose policy. If the BOJ does scrap the YCC, it would likely be viewed by the market as similar to a rate hike, which would push the yen higher. The BOJ will also release an updated inflation forecast, which is expected to be revised upwards. Market participants should be prepared for volatility from the yen after the BOJ announcements on Wednesday. In the US, consumer confidence gained strength in December. UoM Consumer Sentiment jumped to 64.6, beating the forecast of 60.5 and above the November reading of 59.7. Inflation expectations for 2023 decreased to 4.0%, down from 4.4%, although long-term expectations inched higher. USD/JPY is testing resistance at 128.40. Above, there is resistance at 129.40 127.07 and 125.92 are providing support
by OANDA
The BoJ meeting playbook - navigating big moves in the JPYIt’s been many years since Bank of Japan (BoJ) meetings posed significant risks for traders, but this Wednesday’s BoJ meeting holds the potential for significant volatility in USDJPY, as well as the JPY crosses, and JPN225. The risk manager The job of the trader is to manage risk, as well as achieving correct position sizing for every trade. So, when I look at the explosion in USDJPY 1-week (options) implied volatility – essentially the markets' expectation of movement in USDJPY through the week – we see this at 23%, and the highest levels since March 2020. For context, this equates to expectations of around 350 pips, or a near 3% move this week in USDJPY (higher or lower). Much of this move could be realised on the day from headlines from the BoJ meeting and what the market hears relative to positioning and expectations. When we see such high expectations of movement, the question traders need to ask is whether they should reduce or even exit exposures before the event. In some cases when there is a strong skew in the potential outcomes and a high enough conviction, whether to even take a position over the event – in special situations these events can offer high/risk reward outcomes. We assess that here. Key times to be aware of – Headlines and the outcome from the meeting will come out on Wednesday, likely in the Asia session afternoon. Unlike most data points there is no set time, but we should hear the outcome between 13:00 and 15:00 AEDT. What is expected from the BoJ? Last week we saw an article in the Japanese publication Yomiuri Shimbun that the BoJ was reviewing the negative effects of its current monetary policy regime – despite only changing its policy setting on 20 December, where they lifted the ceiling (or cap) by which the 10yr JGB yield (Japanese govt bond) can trade to 0.50%, the market swiftly took this to mean another key change was incoming. The fact the BoJ had to ramp up its daily bond buying to a record amount to defend the 0.50% cap, suggests their policy setting is still highly dysfunctional, and with inflation pushing 4% its current yield curve control (YCC) program is on borrowed time. While we can look at the possible outcomes, and assign a probability and potential market reaction, I think in all cases the BoJ will try its utmost to say the action is designed to address an increasingly dysfunctional market and should not be seen as a tightening of policy. The market will likely look through this and ignore their pleas. Given 10yr JGBs currently trade above 0.5% (or 50bp), 10yr swap rates trade above 90bp and the JPY has had a one-way move of late, one assumes the market is skewed and part positioned to an outcome that the BoJ abolish its YCC program. This plays into my back-of-the-envelope playbook. Possible actions: • The BoJ again widens the yield band to -/+0.75% while continuing to buy incredible amounts of JGBs in its daily operations to support the 0.75% yield cap - an action that doesn’t make a huge amount of sense as it would not resolve the dysfunctional market and would need to be altered again – likely promotes a 2%+ rally on the day in USDJPY • The BoJ widens the yield band out to -/+1% while continuing to buy JGBs to support the cap – tactically this makes more sense, but an action that could cause a 1%+ rally in USDJPY • The BoJ leave policy unchanged but signals a change is coming – this would surprise and cause a 2.5%+ rally on the day in USDJPY • Completely terminates its YCC program – the market is leaning this way but would still likely cause a 3%+ sell-off on the day in USDJPY • Shifts the YCC target which is currently capping 10yr JGBs at 0.50% and move to target the 5yr JGB instead – it's hard to create a clear framework on this policy change, but an action that likely leads to the most subdued reaction seen in USDJPY For those new to BoJ policy and bond markets this event risk does require some research. As always, moves in markets come from current market positioning, expectations, and the actual outcome. For me, simplistically, given expectations are now elevated for an end to YCC and its yield cap – hence, a lack of action would be a big surprise and cause a significant move higher in USDJPY. If the BoJ decides to remove its YCC cap, then despite positioning I think there is further to go, and it could have huge implications for the JPY and see USDJPY smashed as traders front-run the idea of massive capital repatriation from Japanese pension funds eyeing more compelling returns in their domestic bond markets. The BoJ meeting holds the potential for bug moves not just in the JPY and JPN225 but could influence the USD across other G10 pairs too – be aware of the event and manage the risks accordingly.
by Pepperstone
2
WHAT HAPPENED WITH JPY?Hello guys! Here is a quick summary of what happened in the market today, especially in the Japanese one, after the Bank of Japan surprised everyone. On Tuesday, the Bank of Japan made its first move towards a shift away from ultra-loose monetary policy after weeks of speculation. As part of an adjustment to its yield curve control policy, the BoJ decided to increase the range of its target for the yield on 10-year government bonds from +/- 25 basis points to +/- 50 basis points. Despite this change, the Bank kept its short-term policy rate at -0.1% and maintained its commitment to easing in its statement. In fact, the BoJ plans to increase its purchases of Japanese government bonds in the coming quarter, from 7.3 trillion yen per month to 9 trillion yen. The Bank of Japan's policy adjustment was more hawkish than financial markets had anticipated, and contributed to the yen's further recovery from a 30-year low reached this October. A stronger yen may provide some relief to the Japanese economy, which has been grappling with the high cost of imports due to the sharp decline in the value of the yen this year. As the possibility of more hawkish central bank actions and a potential recession in 2023 increased, the value of Asian currencies against the US dollar decreased further and risk appetite remained low. While the US dollar strengthened against most Asian currencies, the strength of the yen, euro, and pound weighed on the dollar index and dollar index futures. What do you think about the BoJ's move? FX:USDJPY FX:USDJPY BMFBOVESPA:JPY1! PEPPERSTONE:JPYX
Short
by m_maia14
4
Japanese yen edges lowerThe Japanese yen continues to have a quiet week. USD/JPY has edged up 0.20% and is trading at 132.50. There is optimism in the air ahead of the US inflation report for December. The forecast is for inflation to fall, which is exactly what investors want to hear. The consensus for headline inflation stands at 6.5%, following the November gain of 7.1%. The core rate is also expected to ease, with a forecast of 5.7% in December, compared to 6.0% in November. We've seen in recent months how inflation reports can move the equity and currency markets and investors should be prepared for the same from tomorrow's inflation report. Soft inflation releases have sent the US dollar lower, as the markets have assumed that the Fed will ease up on the pace of rates and even cuts rates late in the year. The Fed continues to present a hawkish stance, but the markets will likely march to their own tune if inflation comes in as expected or drops even lower. The markets have priced in a peak fed funds rate of 4.93%, lower than the Fed dot plot which projects rates peaking at 5-5.25%. Some Fed members have said rates could go even higher than that, but that hasn't made much impression on the markets. The Bank of Japan meets next week, and investors will be watching carefully. The BoJ meetings are no longer sleepy affairs with little substance, as the markets saw in December when the BoJ stunned the markets by widening the yield curve control band. We're unlikely to get more fireworks at the upcoming meeting, but the BoJ's inflation forecasts will be significant. There have been reports that the BoJ may raise the forecasts for core inflation. This would be bullish for the yen as a higher inflation forecast would be a prerequisite for the BoJ normalizing policy. There is weak resistance at 132.13, followed by 133.30 131.25 and 130.60 are the next support lines
by OANDA
Is the Yen rally over?The truth is that I don't know if it's over or not. It certainly feels like the USDJPY pair is going a lot lower, given that the Fed is very close to pausing and cutting rates in 2023. Deflation has always benefited the Yen, which might be the case again. The BoJ took the best stance of all central banks, as they held rates low and provided liquidity when the global economy was slowing down and would very clearly go into a deep recession in 2023-2024. Eventually, rates elsewhere will go down, but rates in Japan will be pretty much the same (go down a lot less). Therefore, the JPY could outperform everyone else. However, there is a chance that USDJPY is about to bottom. It's very close to testing a key area; I think it will sweep the double bottom and bottom at the S3 monthly pivot. If there is going to be a bottom soon, that's where I expect it to be. If the USD is to bounce quickly, that's where I expect it. It feels too early for the dollar to collapse outright, and maybe we will get a mini inflation scare before we move properly into deflation. So this is my bullish scenario. Fall slightly below 130 and then slowly go back up. 135.8 is the first target, and if 138 is reclaimed, the next target is 145.
by BitcoinMacro
USD/JPY extends losses after BOJ SummaryThe Japanese yen continues to lose ground this week and is in negative territory on Wednesday. In the European session, USD/JPY is trading at 134.11, up 0.49%. Post-Christmas holiday trading remains thin, but USD/JPY has made steady gains and climbed 1% this week. The US dollar has recovered somewhat after last Tuesday's slide when it fell a staggering 3.8% after the BoJ widened its yield curve band. The move blindsided the markets, which had not expected any major policy moves prior to the end of Governor Kuroda's term in April. Investors were all ears as the BoJ released today the summary of opinions from last week's dramatic meeting. The summary of opinions showed that several of the nine board members said that the tweak to yield control was aimed at enhancing the current stimulus programme rather than ending it. This reiterated what Governor Kuroda stated in a press conference after the meeting. Still, speculation remains high that the BoJ could take further steps that tighten policy, and even exit the Bank's ultra-loose policy, especially with inflation running at a 40-year high. The summary of opinions indicated that members discussed rising inflation and the possibility that higher wages would remove the risk of a return to deflation. The BoJ has been focused on wages, arguing that strong wage growth will ensure that inflation is sustainable, as opposed to inflation that is driven by higher costs for energy and raw materials. The government is also making wages a top priority, and there are indications that major companies and labour unions will negotiate higher wages in the spring. If the BoJ sees that wages are rising it could raise its yield curve control target, which is currently around 0% for 10-year bonds. The BoJ will likely be back in the headlines shortly, with its next meeting on Jan. 17th and 18th. USD/JPY is testing resistance at 134.12. Above, there is resistance at 134.82 There is support at 133.25 and 132.29
by OANDA
Yen edges lower, Kuroda says no exit plannedWith most financial markets closed on Monday, trading will be thin. Japanese markets are open and USD/JPY has edged higher, trading at 132.82, up 0.34%. The Bank of Japan announced a policy change last week, and the ramifications were massive for the Japanese yen, as USD/JPY jumped as much as 4.8% following the move. The BoJ widened the yield curve on long-term bonds from 0.25% to 0.50% but maintained the yield target at 0%. The tweak to the yield curve caught the markets napping, and the shocking move now has the markets buzzing as to whether the BoJ is planning further policy changes to its ultra-low monetary policy. Investors heard from the man himself earlier today, as BoJ Governor Kuroda gave a speech where he stated that last week's move was not a prelude to withdrawing its massive stimulus programme. In fact, he said the widening of the yield curve would enhance the Bank's ultra-easy policy. Kuroda reiterated his well-worn theme that the BoJ wants to see wages rise in order to hit its 2% inflation target in a "sustainable and stable manner" and plans to continue monetary easing through yield curve control. The key question is whether the markets are buying what Kuroda is selling. Prior to last week, the markets were expecting an uneventful end to Kuroda's decade at the helm of the BoJ, which ends in April. That view has been turned upside down after the yield curve tweak, and I would expect the markets will be on guard for additional tightening moves, despite Kuroda's insistence that it is business as usual at the BoJ. Last week wrapped up with further signs that inflation is falling in the US. The Fed's preferred inflation gauge, the PCE Price Index for November dropped to 5.5% y/y, down from 6.1%. As well, UoM inflation expectations slowed to 4.4% y/y in December, down from 4.6% a month earlier. UoM Consumer Sentiment rose to 59.7, up from 59.1, as consumers are more confident about the economy.  Although there is evidence that inflation is easing, strong wage growth and a robust labour market likely mean that the Fed is unlikely to change its view that interest rates will rise above 5% before peaking. USD/JPY is testing resistance at 132.70. Above, there is resistance at 133.62 There is support at 131.72 and 130.15
by OANDA
Yen Pair Moves And The Right Market MindsetSo the Yen Pairs continued their move down.. But what can you take away from it? Well as it happens, there is a lot! 1) Markets will always have enormous swings one way or another. That is just simply the nature of anything that has value. Sometimes it will be VERY high, or VERY low. 2) Make sure you are going to remain solvent on an extreme move. 3)Understand that the Markets are not built for one Trade big wins. Its a process of taking lots of Trades over time with patience. So, you can see these factors from both the previous move and current one. Watch for more, aswell as my pre-determined entry/exit points. Trade Small and Trade Safe Always.
by WillSebastian
6
MFG: Long term strategyThis chart indicates a strong relation of MFG (generally applies to most bank stocks) with gov yield rates - 5 year Japanese bond in this case. Considering the chart pattern, there is still a possibility of testing a bottom for a couple of months, but the stock price should soon catch up with the yield rate. As the downside risk is limited, we may be seeing a great opportunity to accumulate and add these stocks to your portfolio for income gain. FRB started rasing the funds rate. This may continue for a couple of years and it is best to watch their monetary policy. The current inflation we are experiencing is worldwide and BOJ will follow FRB - FRB is running ahead of BOJ. FRB will tell you when to exit.
NYSE:MFGLong
by Tomatrader-X
2
USD/JPY rockets after BoJ shockerThe Japanese yen has sent the dollar tumbling on Tuesday. USD/JPY has fallen 3.26% and is trading at 132.44 in Europe. In the Asian session, USD/JPY fell as low as 131.99 but has recovered slightly. At the end of its policy meeting, the Bank of Japan stunned the markets with a change to its yield curve control (YCC). The BoJ announced it would widen the band around the 10-year bond yield to 50 basis points, up from 25 bp. The move allows long-term interest rates to rise higher and the reaction was deafening, as the yen soared and climbed to its highest level since August 11th. The move was completely unexpected, as the BoJ meeting was expected to be a sleeper with no policy changes. It was just yesterday that I wrote in these pages that the BoJ was not expected to change policy until the changing of the guard in April 2023, when Governor Kuroda steps down. The BoJ move is certainly dramatic but needs to be kept in proportion. The BoJ is maintaining its YCC targets and said it would sharply increase bond purchases. This could be a signal that the Bank is tweaking its current ultra-loose policy and is not planning to withdraw stimulus. The BOJ has staunchly defended its yield cap with massive bond purchases, and this has distorted the yield curve and fueled a sharp drop in the yen, which has contributed to higher costs for imports of raw materials. BoJ policy makers may have become uncomfortable with these side effects and felt that the time was right to take a small step towards normalisation. This 'baby step' packed a massive punch as seen in the yen's reaction, and the markets will be looking for hints at further moves from Governor Kuroda as his term winds down. USD/JPY has broken below several support levels. The next support level is 131.13
by OANDA
1
USD/JPY dips on possible policy tweakThe Japanese yen has started the week in positive territory. In the European session, USD/JPY is trading at 136.22, down 0.38%. The yen is coming off a busy week, as USD/JPY traded in a 350-point range but closed the week almost unchanged. The markets are keeping an eye on April 2023, when Bank of Japan Governor Kuroda retires and a new governor is appointed. This has raised speculation that the changing of the guard could lead to policy changes at the bank. There was a report today that the BoJ and the government could revise their decade-old statement, which pledges to achieve the 2% inflation target "at the earliest date possible". This has resulted in the BoJ maintaining its radical stimulus programme and keeping interest rates ultra-low, at a time when other major central banks are busy raising rates in order to curb inflation. This policy was initiated in 2013, when Japan's economy was marked by deflation. With consumer prices rising and a weak yen contributing to inflation, the statement could be out of date and the new BoJ governor may feel the timing is right to revise the statement, perhaps making the inflation target more flexible. There is rising speculation that the new governor could tweak yield curve control, which has kept a cap on 10-year Japan's government bonds and fueled the yen's sharp descent this year. For now, however, it is likely to be business as usual - the BoJ winds up a two-day meeting on Tuesday and is not expected to make any changes to monetary policy. USD/JPY is testing support at 136.48. This is followed by support at 134.78 There is resistance at 137.64 and 138.43
by OANDA
USD/JPY - China jitters propel yen higherAfter strong gains last week, the Japanese yen has extended its gains on Monday. USD/JPY is trading at 138.23 in the European session, down 0.67%. China has applied its Covid-zero policy with a heavy hand, but Covid cases continue to rise nonetheless. The mass lockdowns have triggered widespread protests, which some injuries reported. The unrest is likely to exacerbate supply-chain disruptions and dampen domestic demand, which has hurt risk appetite. This has resulted in flows to haven assets, such as the Japanese yen. USD/JPY dropped as much as 1% earlier today, but the dollar has managed to recover some of these losses. The yen also received a boost after Bank of Japan Governor Kuroda said that the tightening labour market will push wages higher. Kuroda has long insisted that rising inflation has driven by import costs and the weak yen and is transient. Higher wages would indicate that inflation is sustained, which could result in the BoJ making some changes in its ultra-loose policy. After a short trading week in the US due to the Thanksgiving holiday, the markets will have plenty of US events to digest this week. CB Consumer Confidence will be released on Tuesday, with the November report expected to dip to 100.0, down from 102.5. The key release of the week is nonfarm payrolls on Friday, which could have a major impact on the Fed's decision to raise rates by 50 or 75 basis points at the December 14th meeting. Currently, the likelihood of a 50-bp hike is about 75%, versus 25% for a larger 75-bp increase. Investors are viewing a 50-point move as a dovish pivot, which has been putting pressure on the US dollar. Still, even a 50-bp hike would set a record for yearly rate hikes of 4.25%. There is resistance at 139.82 and 141.58 There is support at 137.39 and 135.63
by OANDA
USD/JPY calm as inflation rises higherThe Japanese yen has edged higher on Friday and is trading at 139.90 in the European session. Inflation continues to creep up in Japan. Core CPI accelerated to 3.6% in October, up from 3.0% in September and edging above the consensus of 3.5%. These levels pale in comparison to what we're seeing in the US, the UK and elsewhere, but Japan hasn't seen these levels of inflation in 40 years. The country has a deflationary mindset, which leads firms to absorb higher costs for fear of losing customers. However, as inflation continues to move higher, that trend is changing and consumers are feeling the pain of higher prices. Despite rising inflation and a weak yen, the Bank of Japan is resolute in maintaining its ultra-loose policy in order to support the weak economy. The BoJ has been an outlier as it has capped interest rates while the global trend has been to raise rates, arguing that cost-push inflation is only temporary. BoJ Governor Kuroda has said that inflation should peak after hitting 3%. Kuroda might want to consult with Jerome Powell or Christine Lagarde about making assumptions about inflation peaks, as they found out to their chagrin that inflation was much stickier than they had anticipated. Ever since the last US inflation report sent the equity markets soaring and the US dollar sliding, the Fed has circled the wagons and telegraphed a hawkish message to the markets. The latest salvo came from Fed member Bullard, who urged the Fed to raise rates to 5%-5.25% at a minimum. Bullard also presented a hawkish scenario in which the funds rate would climb all the way to 7%, a message investors clearly didn't want to hear. Retail sales and unemployment claims were better than expected, another indication that the US economy remains resilient handle further rate hikes. The Fed's coordinated message and the solid data have quelled the stock market rally and boosted the US dollar. USD/JPY is testing support at 139.95. Below, there is support at 138.09 There is resistance at 141.01 and 142.87
by OANDA
1