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USD/JPY jumped to higher levels but then consolidated and slipped in range. What’s next? The meeting of the Bank of Japan awaits markets.

Here is their view, courtesy of eFXdata:

Nomura Research discusses USD/JPY outlook and trading strategies around next week’s BoJ policy meeting.  Nomura considers three scenarios into the meeting and examines their implications for JPY.

1) A formal change in monetary policy (0-5% possibility)

“In this tail risk scenario, we would not recommend dip buying soon thereafter, and even shifting to short USD/JPY positions could be attractive,” Nomura argues.

2)  Adjustments/tweaks to increase JGB market volatility (10-15% possibility)    

“In this scenario, after the dust settles, we would expect JPY weakness to resume. Thus, dip buying of USD/JPY would be attractive,” Nomura adds.

3) No meaningful adjustment, just more dovish (80-90% possibility)

“Under this scenario, we would expect USD/JPY appreciation to accelerate further, and would maintain our long USD/JPY preference,” Nomura argues.

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