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Firmer JPY Fades into NY After Uneventful BoJ

FOREX
  • The BoJ decision came and went with no change to headline monetary policy - as expected. The JPY firmed on the back of Ueda's press conference, at which he noted that the Bank will examine whether to continue its sizeable monetary easing, including negative interest rates, when the Bank's inflation target is in sight. Nonetheless, JPY strength has faded into NY hours, with little meaningful follow through on BoJ policy.
  • USD/JPY remains at the bottom-end of the daily range, but is off the 146.99 post-Ueda low. As flagged by implied vols ahead of the event, the BoJ reaction amounted to ~100 pips. Nonetheless, a bullish USDJPY theme remains intact and last week’s gains reinforce current conditions. Resistance at 146.41, the Jan 11 high, has recently been cleared, resuming the bull cycle.
  • USD is softer, but well off session lows headed into NY hours as markets catch up with the ~3bps rise in the US 10y yield over the European open. This helped drag EUR/USD, AUD/USD and others further off session highs. Price action is relatively gradual at this stage, but unlike yesterday, volumes are faring better, with EUR, GBP and (unsurprisingly) JPY futures seeing decent activity.
  • Focus for the remainder of the Tuesday session rests on the prelim Eurozone consumer confidence release on top of the January Richmond Fed Manufacturing Index. Central bankers at both the ECB and the Fed are inside their pre-decision media quiet periods, which should keep headline risk relatively low.
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