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USD/JPY to 114.00?
The frenetic price action post FOMC today left both bulls and bears frustrated as the Fed left the statement almost unchanged but left open the door to possible rate hike in June, although Fed futures continue to discount that possibility assigning only at 19% chance of that happening.
The Fed officials themselves however are not nearly as dovish as the market, with Esther George actually dissenting and voting for a 25bp hike. The Fed understands that its credibility is at stake and that it must act sooner rather than later. That’s why despite the initially dovish interpretation USD/JPY held the 111.00 figure and remains relatively well bid.
Tonight however, the market will get another shock to the system as BOJ meeting presents its monthly policy action. Although few market participants expect the BOJ to make any dramatic moves, Japanese officials could push the pair higher if they suggest that they are open to the prospect of negative rate loans. Such a statement could push USD/JPY through the 112.00 barrier, but if the BOJ offers nothing new the pair could quickly revert to a test of 110.00