Ahead of the growing anticipations over the future of Japan’s monetary policy, it has sent the currency markets to hardly predict.
As the Bank of Japan Governor Haruki Kuroda had little consensus to come up with for the September monetary policy, both Eaton Vance Corp. and the Bank of New York Mellon Corp. unit has decided to abstain any positions in the yen.
Meanwhile, some market players ended their bets on declines in the dollar against the Japanese yen, according to JPMorgan Chase & Co. Thus, it was a disappointment as the option premium on contracts to buy yen in a monthly time frame has disappeared for the first time since November, before retreating this week.
Japan was considered among the focal points of a global bond sell off for this month, during the course of ballooning anticipations over central bank’s decision to pull back from buying long-term bonds after Kuroda claimed a comprehensive review of its easing program.
Further, the governor said last week that low long-term yields will significantly affect returns on pension as well as on insurance investments, despite signaling easing with no reduction. The Federal Reserve is expected to provide a decision on interest rates shortly after the BOJ’s meeting, which adds mounting anticipations over yen’s direction.
Yen Trading Lower Amid Morning Session
The USD/JPY pair currently changed hands at 102.05, with the dollar rallying at 0.20% against the yen from yesterday’s close of trade.
The currency pair tries to hit support 101.60, and a fall through is expected to touch the next support level of 101.15.
As Japan has no economic release today, market players are closely watching the Bank of Japan’s interest rate decision along with Governor Haruhiko Kuroda’s speech.
In addition, the total merchandise trade balance of the nation, along with the machine tool orders, flash Nikkei manufacturing PMI, all industry activity index, and all the scheduled release for next week are included market participants’ radar.
Expectation on USD/JPY Movement
The chart below illustrates the pair’s movement, and an indicator was used to identify a trend marking the first three lowest levels as those numbered candlesticks. The third candle opened slightly higher at 100.603 nearly resting at resistance 100.998 on August 15.
In essence, execute buy position on the third candle as it is expected to rally, which in fact did as the next candle edged higher at 101.930 on August 26. Meanwhile, the stock prices were seen consolidating and tried to break out, which could suggest a false one.
Given that market participants are closely watching on the interest rates, we suggest to wait for a supporting candle as the stock is presently breaking out. However, if the next candle will follow a downward trend, it only means that it will continue to go down.
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