USD/JPY likely to be capped around 132/133 – TDS

The Bank of Japan decided to keep its monetary policy unchanged. The BoJ’s inaction sent the USD/JPY pair soaring. However, economists at TD Securities they expect the 132/133 zone to limit the rise of the pair.

The BoJ does not change its policy, all attention is on the new governor

“The BoJ kept its monetary policy unchanged in a unanimous vote that silenced speculation about a widening or even dismantling of the yield curve control (YCC) band. The BoJ revised its inflation forecasts up and growth forecasts down. The BoJ will continue to purchase bonds on a large scale and increase it flexibly if necessary. This suggests that the Bank will defend the objective of the YCC for now.”

“We expect a policy change regarding bands and even the JGB 10 year target once there is a new BoJ Governor in Aprilbut it seems that for now they have bought time with adjustments of the YCC operations.”

“Short squeeze USD/JPY after BoJ announcement. However, we expect this move to have some limitations as the BoJ is still likely to change monetary policy this year. That implies better levels to turn bearish again in the USD/JPY”.

“For now, we think some patience is required and expect 132/133 to be an important technical pivot short-term (as it coincides with bearish resistance).”

“We continue to believe that the trade bias of the Japanese yen remains asymmetrical (upward) over the medium term.”