Forex Top Team

BOJ Decides on Reduction “Policy,” Yen Sells Off; Monitoring Market Reaction to Governor Ueda’s Press Conference and Intervention Concerns

In the highly anticipated BOJ policy meeting, the decision was made to establish a “policy” for reducing bond purchases in the upcoming July meeting. This means that the specific details of the reduction were not announced this time. The BOJ plans to determine the reduction amount through discussions with bond market participants to avoid shocking the market. This decision has distanced the prospect of additional rate hikes.

In the forex market, the reaction has been a broad yen sell-off. The USD/JPY has risen to the 158 yen level, and other cross-yen pairs are also moving in the direction of yen depreciation, leading to a comprehensive yen weakness.

All eyes are now on the press conference by BOJ Governor Ueda, scheduled for 3:30 PM JST. In his recent press conference, Governor Ueda caused a yen sell-off by clearly stating that the current yen depreciation does not impact underlying inflation. Although the BOJ maintains the principle of not targeting exchange rates, how the market interprets the BOJ’s communication is crucial. Questions about the reduction in bond purchases and potential additional rate hikes are expected, and Ueda’s answers could further drive yen depreciation, so caution is warranted.

If the yen depreciation proceeds rapidly, driven primarily by speculative foreign traders, there might be renewed speculation about government and BOJ intervention. Despite the caution expressed by U.S. Treasury Secretary Yellen, MOF’s Kanda has shown confidence in their communication and coordination.

Upcoming economic indicators in overseas markets include the final French consumer price index (May), euro area trade balance (April), Canadian manufacturing sales (April), Canadian wholesale sales (April), U.S. import price index (May), U.S. export price index (May), and the preliminary University of Michigan consumer sentiment index (June). The focus will be on the June University of Michigan index, with market consensus predicting a rise to 72.0 from the previous 69.1. It will be crucial to see if this supports post-FOMC dollar buying.

Other events and speeches include the press conference by Governor Ueda, as well as speeches and participation in economic conferences by Bostjan Vasle, Governor of the Bank of Slovenia, ECB Chief Economist Philip Lane, ECB Executive Board Member Isabel Schnabel, Governor of the Bank of Latvia Mārtiņš Kazāks, ECB President Christine Lagarde, President of the Cleveland Federal Reserve Bank Loretta Mester, and President of the Chicago Federal Reserve Bank Austan Goolsbee. Additionally, the Ipsos Inflation Attitudes Survey (May) will be published in the morning, which could be a reference for the Bank of England’s monetary policy next week.

 

The market reaction has shifted from yen selling to yen buying after Governor Ueda’s press conference, with the USD/JPY long position being stopped out.

Currently, I am looking for an entry point to short EUR/JPY.

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12th in July 2024, Today’s Options

EUR/USD: EUR amounts 1.0650: €1.8 billion 1.0690: €1.1 billion 1.0695: €873 million 1.0700: €896 million 1.0800: €1.7 billion 1.0850: €2.4 billion 1.0900: €934 million USD/JPY:

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