Forex Top Team

Excessive Expectations for Yen Strength Have Slightly Receded

The Bank of Japan’s monetary policy meeting maintained its accommodative stance as expected for domestic participants. However, there was some anticipation, primarily among foreign participants, that there might be hints of moving away from negative interest rates, specifically the expectation that there could be the removal of certain expressions without hesitation. Due to this, there was a broad selling of the yen in response to the maintenance of the existing stance in the statement.

The USD/JPY pair surged from around 142.60 yen to 143.78 yen and has since been trading in the 143-yen range.

Governor Kuroda expressed the commitment to maintaining the accommodative stance during the press conference and clarified that his challenging statements, which had caused some discussion in the market, were in line with a general approach towards their job.

Excessive expectations for an exit strategy have receded in this situation. However, the market has not abandoned expectations of a negative interest rate removal in the first half of next year, and the impact is likely to be limited.

Subsequently, trading is expected to become quieter, especially among foreign participants, as the market heads towards the Christmas holidays, leading to relatively calm market conditions. The outlook is for trading centered around the 143-yen range.

After the meeting, there was a rapid yen selling trend in the cross yen pairs. Expectations for yen strength have diminished. However, similar to USD/JPY, future movements are expected to be relatively calm. The EUR/JPY pair is expected to trade in the 156-yen to 157-yen range.

EUR/USD and GBP/USD do not have any significant catalysts, and trading is likely to remain calm, similar to the Tokyo market.

I had placed a short USD/JPY position in anticipation of the Bank of Japan’s actions, but unfortunately, there was no movement from the Bank of Japan, and I got stopped out due to the upward movement. Currently, I only have a long position in BTC/USD (Bitcoin).

Today, I am keeping an eye on the movements of the CAD as there is the Canadian Consumer Price Index (CPI).