USD / JPY hit weekly low, breaks below 109.50 ahead of BoJ and FOMC meetings

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  • Market sentiment is mixed as major US equity indices rise while safe-haven currencies strengthen.
  • BoJ Preview: Eight Big Banks Forecasts, Very Little Upside Potential.
  • FOMC: Investors expect the Fed to keep its monetary policy and QE unchanged.

Earlier during the European session, the USD/JPY it trimmed some of its losses, but as the day progressed, the pair trimmed its gains, trading at 109.28, losing 0.11% at the time of writing.

Market sentiment is mixed. The major European and US stock indices are recovering from yesterday’s losses, buying on the “dips”. However, in the currency market, the Swiss franc, the Japanese yen and the US dollar benefit from safe-haven flows, which strengthen as commodity-linked currencies fall.

The US dollar index, which measures the performance of six currencies in a basket, remains lateralized during the New York session, at 93.28. The yield on 10-year US Treasuries stands at 1.314%, unchanged, favoring the Japanese yen against the US dollar.

The central banks of Japan and the US meet to discuss monetary policy

On Wednesday, the Bank of Japan (BoJ) will release its monetary policy statement. The BoJ’s inflation target is 2%, while its interest rate is -0.10%. Analysts from different institutions expect the BoJ to keep rates unchanged, keep its ETF purchases and control the yield curve on the 10-year JGB.

The logic behind the above is lower inflationary readings, the Delta outbreak lasted longer than expected, and the change in leadership of the PLD.

Meanwhile, in the United States, the Federal Open Market Committee kicked off its two-day monetary policy meeting on Tuesday. The September meeting would reveal the monetary policy statement and the Summary of Economic Projections (SEP), including the updated economic projections for 2021, 2022 and 2023. It should be noted that the dot plot will also be updated. If three FOMC members join the seven expecting a rate hike by 2022, it could change the prospects for a rate hike from 2023 to the last quarter of 2022.

Technical Levels

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