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FOREX: BOJ Hike Potential Supports Yen Recovery, Notable Overnight Volatility

FOREX
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  • While G10 currencies trade mixed amid an unchanged Dollar index on Thursday, the focus remains firmly on the Japanese Yen and the significant market moves overnight. Assisting the prior session’s direction of travel, Bloomberg headlines crossed overnight, reiterating that the BoJ sees a good chance to hike rates next week absent a US shock.
  • The report sends the strongest signal yet that the BoJ is preparing for a rate hike next week, bolstering the signals sent by BOJ Governor Ueda and Deputy Governor Himino earlier this week. Notably, Nomura analysts have brought forward their call for the next hike to January from March, as recent comments suggest it is more confident about factors likely to influence the decision.
  • Amid BOJ hike odds rising to ~80%, the Japanese Yen rallied sharply during APAC hours, with USDJPY sinking from around 156.50 to a 155.21 low. While the latest move lower is considered technically corrective for now, the pair has traded through the 20-day EMA and the overnight extension narrowed the gap substantially to 154.90, the 50-day EMA.
  • In the crosses, EURJPY notably took out the psychological 160.00 mark to trade a fresh one month low of 159.75. A clear breach of 160.00 would strengthen a developing bearish threat and signal scope for a deeper retracement. GBPJPY has also returned to recent lows and is now below 190.00. This extends the pullback from the Dec 30 highs to 4.6%, and the focus now turns to 188.09, the Dec 03 low.
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  • While G10 currencies trade mixed amid an unchanged Dollar index on Thursday, the focus remains firmly on the Japanese Yen and the significant market moves overnight. Assisting the prior session’s direction of travel, Bloomberg headlines crossed overnight, reiterating that the BoJ sees a good chance to hike rates next week absent a US shock.
  • The report sends the strongest signal yet that the BoJ is preparing for a rate hike next week, bolstering the signals sent by BOJ Governor Ueda and Deputy Governor Himino earlier this week. Notably, Nomura analysts have brought forward their call for the next hike to January from March, as recent comments suggest it is more confident about factors likely to influence the decision.
  • Amid BOJ hike odds rising to ~80%, the Japanese Yen rallied sharply during APAC hours, with USDJPY sinking from around 156.50 to a 155.21 low. While the latest move lower is considered technically corrective for now, the pair has traded through the 20-day EMA and the overnight extension narrowed the gap substantially to 154.90, the 50-day EMA.
  • In the crosses, EURJPY notably took out the psychological 160.00 mark to trade a fresh one month low of 159.75. A clear breach of 160.00 would strengthen a developing bearish threat and signal scope for a deeper retracement. GBPJPY has also returned to recent lows and is now below 190.00. This extends the pullback from the Dec 30 highs to 4.6%, and the focus now turns to 188.09, the Dec 03 low.