We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Wall Street
More View more
USD/JPY to Eye Downside Targets on Dovish Fed, Wait-and-See BoJ

USD/JPY to Eye Downside Targets on Dovish Fed, Wait-and-See BoJ

2016-06-10 22:28:00
David Song, Strategist
USD/JPY to Eye Downside Targets on Dovish Fed, Wait-and-See BoJ

Fundamental Forecast for JPY: Bullish

For more updates, sign up for David's e-mail distribution list.

USD/JPY is poised to face increased volatility over the coming days as market attention turns to the Federal Open Market Committee (FOMC) and the Bank of Japan (BoJ) interest-rate decisions scheduled for the week ahead.

Even though the FOMC appears to be on course to implement higher borrowing-costs in 2016, another 9 to 1 split accompanied by a material shift in the central bank’s economic projections may drag on the dollar as market participants push out bets for the next rate-hike. Indeed, Fed Chair Janet Yellen and Co. may show a greater willingness to further delay the normalization cycle as inflation expectations remain largely subdued, and the central bank may adopt a more dovish outlook for monetary policy in an effort to stem the downside risks surrounding the U.S. economy. As a result, a downward revision in the growth and inflation forecast paired with a reduction in the interest rate dot-plot is likely to produce headwinds for the greenback as market participants reprice the odds for a further adjustment in monetary policy.

At the same time, the BoJ may largely endorse a wait-and-see approach especially as Prime Minster Shinzo Abe delays the sale-tax hike and pledges to take ‘bold’ measures to encourage a stronger recovery, and more of the same from Governor Haruhiko Kuroda and Co. may boost the appeal of the Japanese Yen as market participants scale back bets for more non-standard measures. Moreover, a further deterioration in risk sentiment may also heighten the appeal of the low-yielding currency, and the weakening outlook for global growth may prop up the Yen as Japan returns to its historical role as a net-lender to the world economy.

As a result, a more dovish Fed accompanied by a wait-and-see BoJ may drag on USD/JPY, and the bearish trend from earlier this year may reassert itself over the near to medium-term as market participants revamp their outlook for monetary policy. - DS

USD/JPY to Eye Downside Targets on Dovish Fed, Wait-and-See BoJ

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.


News & Analysis at your fingertips.