BoJ Decision Day:
The most recent Bank of Japan decision was to leave current levels of stimulus unchanged. But as we spoke about last time, Kuroda’s quotes around keeping course with steady levels of stimulus to achieve their 2% inflation target didn’t really line up with the fundamental state of the Japanese economy.
This leads nicely into today’s BOJ decision on Monetary Policy and accompanying outlook report, where a change is now very much in play. Bloomberg surveyed economists are very much divided on whether Kuroda and the BoJ will expand its asset-purchase program to further record levels, putting the decision and Japanese Yen pairs in play for the day.
“Sixteen of 36 analysts surveyed by Bloomberg said they expect additional easing, eight forecast more stimulus at a later date and 12 see no prospect of a policy change in the foreseeable future.”
With the BoJ currently targeting an annual expansion of ¥80 trillion via the purchase of Japanese government bonds, easing would see the pace of asset purchases ramped up to an annual pace of ¥100 trillion Yen.
Remember that exchange-traded funds and real estate investment trusts are also at their disposal and Kuroda has spoken in the past about having more than one option available to the BoJ when it comes to policy tools. If they do decide to ease, the government bonds headline number will be the initial spike, but the market will dig deeper as the fallout settles.
BoJ Scenarios Overview:
If the BOJ ease (announce more stimulus) – USDJPY bullish.
If the BOJ stay the course (no changes announced with dovish projections) – USDJPY bearish.
Click on chart to see a larger view.
This USD/JPY chart was featured as yesterday’s chart of the day in the Fed Chop & Change post but with market expectations split down the middle, it is worth including again here.
Price is close to range resistance but the most tantalising fundamental scenario for me is a hold, accompanied by anything dovish from Kuroda. Keep in mind Thursday’s hawkish FOMC and we could be presented some buying opportunities on spikes down.
What are your thoughts for playing the Bank of Japan? Leave a comment below.
On the Calendar Friday:
NZD ANZ Business Confidence
JPY Monetary Policy Statement
JPY BOJ Outlook Report
JPY BOJ Press Conference
CAD GDP m/m
USD Employment Cost Index q/q
Chart of the Day:
Sticking with the BoJ theme, we jump over to the Yen crosses today with a look at the unheralded CAD/JPY pair.
CAD/JPY 4 Hourly:
Click on chart to see a larger view.
We have clean 4 hour trend line support from which I have then drawn some parallel scenarios away from the market above. Price has bounced off this support level and has now encountered some short term resistance as price flags back towards major support.
The question becomes does today’s Bank of Japan decision become the catalyst for a hold or a breakout. Try to think about it in terms of the USD/JPY scenario above while taking into account the easing to come out of Canada. Whichever decision you make, there are levels to manage your risk around.
Do you see opportunity trading the Bank of Japan Decision?
Dane Williams – @VantageFX
Risk Disclosure: In addition to the website disclaimer below, the material on this page prepared by ECN forex broker Vantage FX Pty Ltd, does not contain a record of our prices, or an offer of, or solicitation for, a transaction in any financial instrument. The research contained in this report should not be construed as a solicitation to trade. All opinions, news, research, analysis, prices or other information is provided as general market commentary and marketing communication – not as investment advice. Consequently any person opening a trading account and acting on it does so entirely at their own risk. The experts writers express their personal opinions and will not assume any responsibility whatsoever for the actions of the reader. We always aim for maximum accuracy and timeliness and STP forex broker Vantage FX shall not be liable for any loss or damage, consequential or otherwise, which may arise from the use or reliance on this service and its content, inaccurate information or typos. No representation is being made that any results discussed within the report will be achieved, and past performance is not indicative of future performance.