USD/JPY analysis: will the BOJ dare to change its monetary policy?
|USD/JPY Current price: 110.97
- Yen strong as investors hope the BOJ will introduce some changes to its monetary policy.
- Market's reaction could be limited ahead of Fed's decision next Wednesday.
The USD/JPY pair trades uneventfully around the 111.00 level, as investors are in waiting mode ahead of the BOJ's monetary policy meeting, speculating of a possible tweak of its current ultra-loose policy following some rumors that made the rounds over the last couple of weeks. Early Monday, the BOJ offered to buy an unlimited amount of bonds for a third time this month, as the benchmark 10-year yield rose past 0.11%, reaching its highest in over a year-and-a-half, as yields have been unusually volatile ahead of today's meeting.
Chances that the BOJ will make a change to the current monetary policy are quite reduced, despite nervous speculators. The ongoing program has begun over 5 years ago, but inflation remains worryingly low, even despite the central bank rose the amount pushed into the system to ¥80tn per year, a couple of years ago. Market players believe that the Bank of Japan can't continue with the current easing for too long. What has been sounding out loud these days is a potential move of ETFs buying away from the Nikkei 225 and towards the Topix index, on speculation equities' prices are highly inflated by BOJ's cash injections. An on-hold stance will likely disappoint yen bulls, but given broad dollar's weakness and the upcoming Fed' meeting next Wednesday, movements could be limited. Japan will also publish employment, housing, and Industrial Production data.
The pair edged slightly lower but remained within Friday's range. The pair has held below the 111.40 Fibonacci resistance for over a week already, and the short-term picture indicates that bears are still in control of the pair, as it is stuck around a flat 200 SMA and well below the 100 SMA, while the Momentum indicator turned south, now crossing its mid-line, while the RSI holds directionless around 44. Upcoming direction depends on how the market reacts to BOJ's decision and Japanese data, with a break below 110.58, the low set last week, opening doors for a steeper decline below the 110.00 figure.
Support levels: 110.55 110.20 109.75
Resistance levels: 111.40 111.85 112.20
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