Rallies Sharply Through US Trade On Reports BoJ Could Hike 15bps Today

USD/JPY swung sharply lower as the US session unfolded on Tuesday. Late Asia Pac highs in the pair were in the 155.20/25 region, but we track near 152.80 in early Wednesday dealings. The yen rallied 0.82% for Tuesday's session the best performer in the G10 space. The BBDXY was close to unchanged near 1260.8.

• USD/JPY's peak to trough Tuesday move was around 1.6%. Multiple reports (including by the Nikkei) that the Bank of Japan is mulling a 15bp rate hike significantly bolstered the yen through Tuesday trade.
• Haven demand was also assisted by Israel’s military saying it carried out a “targeted” strike in Beirut against a senior Hezbollah commander it claimed was responsible for the Golan Heights attack at the weekend.
• US equity sentiment was weighed by softer tech results, with Microsoft down sharply in late trading. The Nasdaq closed 1.28% weaker, another yen support point.
• Japan's new FX Chief, Atsushi Mimura, who starts the position today, also stated the weak yen has done more harm than good (per BBG, see this link).
• USD/JPY is back within striking distance of last week's lows, the very significant 151.95 pivot. Below here, the immediate focus would be on 151.10, a Fibonacci retracement point. On the upside, key short-term resistance is much higher at 157.18, the 50-day EMA. Before that is the July 24 high at 155.99.
• Focus today is firmly on the BoJ decision, particularly given the overnight reports of a potential 15bps hike today.
• Before this note we have June retail sales, IP as well. Later on housing starts figures print.