Investors and traders are focused on the Bank of Japan’s interest rate and monetary policy decision coming today and a press conference on Wednesday. Japan has had a very loose monetary policy, so negative interest rates are not really going to have a big impact on the pair.
However, comments on the state of the economy, especially the trade wars with the U.S. will probably impact the pair. This is because the trade wars cause instability in the market and the Yen always feels the pressure.
If the U. S says they will have talks with China around trade, that is a good sign that Japanese Yen will drop and its pairs will go up. If there are no meaningful comments during the conference on Wednesday, it means the trade talks are not going so well which will likely be positive for the Japanese Yen and its crosses will drop.
It is interesting to note that Japan does not want their currency rates to go up right now because Japanese exports will become more expensive. Such an outcome will have a negative impact on the country. This is why Japan is trying very hard to manage the market by making comments that will swing the market in their favor.
Today we can focus on the price action in the treasuries. If treasury yields rise, then USDJPY will probably feel the downside pressure.
Looking at it from the technical side, the USDJPY is straddling a major 50% to 60.1 % retracement zone at 111.655 to 112.022. Therefore the near term movement in the pair is likely to be determined by traders’ reaction to this zone. Focus on the daily chart and look for USDJPY to weaken under 111.655 and strengthen over 112.022.
Origin: Tenkofx Forex Broker
