BoJ Preview: USD/JPY to fall toward 106.60 on a yen boost

Japanese policymakers are expected to maintain their monetary policy unchanged which will be announced on 15 July at 03:00 GMT. The Bank of Japan (BoJ) decision is unlikely to affect USD/JPY, however, the pair could see some short-term reaction, FXStreet’s Chief Analyst Valeria Bednarik briefs.

See – BoJ Preview: Five major banks expectations

Key quotes

“No fireworks are expected as policymakers will likely maintain negative interest rates at -0.1% and their pledge to keep the yield curve under control, by keeping the 10-year JGB  yield at around 0.0%”.

“According to the quarterly economic outlook released last April, policymakers trimmed real GDP growth from 0.9% to a range of -3% -5%. The figures will likely be revised further lower at this point, as an economic recovery in the second half of the year has long been off the table. Core inflation at the end of the first quarter of the year was expected to decline to a range of -0.3%  -0.7%, and could also be revised lower this time.”

“USD/JPY has been unable to leave the current price zone for over four weeks already and seems little the BOJ can do to trigger a sustainable directional move. Financial markets are all about sentiment these days, and an on-hold central bank regardless of downward revisions to forecasts, won’t be enough to offset risk-related sentiment.”

“Short-term reactions are possible. The USD/JPY pair could near the 108.00 level on a break above 107.50, but will likely meet sellers around the first. To the downside, 106.60 is the probable bearish target, in the case the Japanese currency gets a boost from the BoJ.”