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Scenarios For September BoJ MPM & USD/JPY Targets –

The Fed’s September decision is closely watched, but it’s not the only one. Watch out for the Bank of Japan. Here are scenarios by Deutsche Bank and the potential reactions in USD/JPY:

Here is their view, courtesy of eFXnews:

In Japan, the BoJ will conduct a comprehensive assessment of policy on 21 September, but we see scant chance that it will cut its 2% price stability target or admit that its monetary policy is at its limits.

The markets broadly expect the following. (1)  The BoJ will shift its price stability target date from its effectively abandoned two-year period to more flexible phrasing.  (2)  It will give itself greater latitude in its JGB purchasing operations to address doubts over sustainability, widening its annual target from ¥80trn, e.g. to ¥70-90trn.  (3)  It will reiterate that its monetary policy remains effective and does not face any near-term limits. A summary of the scenario for BoJ monetary policy is offered in Figure 1 as compiled by our economists.

BOJ September possible scenarios USDJPY

We believe that if multiple Fed rate hikes come to be seen as a certainty amid the strength of the US economy, the USD/JPY should regain some of its lost ground. The upside for the rate should grow further if the BoJ should carry out additional easing action. However,  we see a 25% chance of such favorable conditions coming together and the USD/JPY settling at ¥100-110.

If uncertainties arise, including policy events in the US or Japan, the rate could see greater downside.  A steep drop into the ¥90s could prompt stronger technical resistance at ¥100. We would rate this risk at 75%.

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.