USD/JPY: all eyes on the BoJ, could discuss adopting a more flexible monetary policy

USD/JPY has been consolidating above the descending channel's resistance after a spike to 113.13 recent highs, July 17th, and is moving sideways on the daily sticks, directionless, as markets get set for the BoJ and FOMC statement on a jam-packed week ahead. Currently, USD/JPY trading at 110.93 having made a high of 111.01 and a low of 110.88.

• A lot is happening in global markets this week - AmpGFX

USD/JPY dropped to a 110.79 low on Friday after the US GDP faile to meet some lofty expectations, albeit still reading at the highest levels since 2014 Q3:

US Q2 GDP rose by 4.1% saar, its highest level since 2014 Q3. The data were in line with expectations but below some of the punchier estimates, leaving financial markets little changed. Trump spoke saying the fantastic numbers will only get better as he agrees trade deals," explained analyst at ANZ Bank New Zealand Limited ("ANZ").

BoJ expectations:

The BOJ is expected to justify prolonging the current monetary easing policy this week and to also start a discussion on letting its policy become more flexible to mitigate side-effects whilst leaving monetary policy unchanged.

Analysts at Nomura noted that a number of media outlets including Jiji Press and Reuters reported that the BOJ could discuss adopting a more flexible monetary policy:

"However, in view of the increased focus on the side effects of the current easing policy on earnings at financial institutions, we think all that will happen at the upcoming meeting is that methods of making adjustments toward a more flexible monetary policy will be debated and considered, and that there will be no immediate change in policy," 

- the analyst argued. 

USD/JPY levels

Valeria Bednarik, the chief analyst at FXStreet, explained that the pair bottomed this past week at 110.58, and spent most of it below the 61.8% retracement of the July's rally at 111.40:

"In the daily chart, it continues developing well above its 100 and 200 DMA, with the shorter crossing above the larger around 109.75, although technical indicators entered negative territory with strong downward slopes, favoring another slide ahead. Shorter term, and according to the 4 hours chart, the pair is neutral, as it closed right around its 200 SMA and below the 100 SMA, both with mild upward slopes, as technical indicators hold directionless around their mid-lines."