The USD/JPY is stabilizing at just over 114.00 ahead of the Bank of Japan’s policy announcement on Friday, which is not likely to produce any unexpected results.
As a result, market attention is now focused elsewhere in the G10 FX markets on Thursday due to the slew of European banks’ policy announcements.
An Outline Of The Technical Details
USD/JPY CHART Source: Tradingview.com
When it comes to recovering towards November peaks at 115.50, the USD/JPY has managed to clear the most significant technical boundary, which was the previous December peaks just under 114.00.
Still, in order for the USD/JPY to do the same, U.S. yields must first recover back to their pre-Omicron rates before the pair can recover back towards those levels.
An Overview Of The Fundamentals
Following Wednesday’s post-Fed policy decision frenzy, which saw the USD/JPY break out to new month-to-date peaks above the 114.00 level, the pair has been more muted as attention in the foreign exchange markets shifts to other currencies.
Markets were taken by surprise when the Bank of England announced a 15 basis point rate hike. At the same time, the European Central Bank held rates steady and affirmed the end of the P.E.P.P., though it will momentarily increase APP buying in Q2 and Q3 2022 to avoid a cliff-edge decrease in bond-buying in 2022.
Because of all of the monetary authority action in Europe (the S.N.B. and Norges Bank both published policy choices on Thursday), there hasn’t been more attention paid to the USD/JPY pair as of late. E.C.B. President Christine Lagarde was scheduled to speak at 1330 GMT.
As of right now, the U.S. Dollar/Japanese Yen are drifting sideways close to Wednesday’s peaks in the 114.10 range. The Yen is anticipated to be under pressure ahead of the Bank of Japan’s monetary policy announcement on Friday.
At the same time, the bank is not expected to make any shocks (as expected). As far as USD/JPY speculators are concerned, the significant risk events for the year 2021 have already passed.
Traders will have to decide if the “Santa surge” in the global equities market will be able to continue towards the end of the year, which might put downward strain on the relatively secure JPY and upward impact on the USD/JPY.
According to the Bank of Japan, the fast spread of Omicron over most of the world is a danger that might support some Yen demand, mainly if it helps sustain longer-term U.S. government bond rates at historically low levels.
The Federal Reserve’s strong view on the forecast for U.S. economic growth in 2022 and beyond appears to have been misunderstood by the bond markets, as the 10-year Treasury note has been unable to rise over 1.50%.