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JPY: USD/JPY Dips Have Tended To Be Supported Post BoJ Meetings In 2024

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USD/JPY sits slightly higher in latest dealings, last 153.65/70, but remains comfortably within recent ranges. We are some distance from the 20-day EMA support point, 152.24. Recent highs rest at 154.48. We have key event risks coming up in terms of the Fed decision later today and then tomorrow's BoJ meeting outcome. 

  • The clear market bias is for the Fed to cut and the BoJ to hold steady. This is also the market pricing skew, which may leave the respective outlooks presented by these central banks as the bigger USD/JPY driver.
  • Looking back at USD/JPY trends before and after 2024 BoJ meeting outcomes we have generally seen USD/JPY dips supported post the meeting outcomes.
  • The chart below plots USD/JPY in the 10days before and after each meeting outcome (with the pair indexed to 100 on the meeting day). Indeed, on average USD/JPY is around 0.75% higher in the two weeks after BoJ meetings this year.
  • The main two exceptions were the April and July meetings. The July meeting delivered a surprise hike.
  • We could of course see the Ueda led board deliver a surprise hike tomorrow but after the July experience, where Japan asset markets sold off aggressively (in part due to the BoJ move), the central bank may be cautious around delivering another fresh surprise.
  • The general outlook around a resilient US economic backdrop (and the subsequent flow on effect to the Fed), coupled with a gradual BoJ approach to tightening policy, has supported USD/JPY dips in 2024. History may repeat tomorrow if we don't see Ueda hawkish enough relative to current market expectations. 

Fig 1: USD/JPY Performance Around BoJ Meetings This year - Trading Days 

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USD/JPY sits slightly higher in latest dealings, last 153.65/70, but remains comfortably within recent ranges. We are some distance from the 20-day EMA support point, 152.24. Recent highs rest at 154.48. We have key event risks coming up in terms of the Fed decision later today and then tomorrow's BoJ meeting outcome. 

  • The clear market bias is for the Fed to cut and the BoJ to hold steady. This is also the market pricing skew, which may leave the respective outlooks presented by these central banks as the bigger USD/JPY driver.
  • Looking back at USD/JPY trends before and after 2024 BoJ meeting outcomes we have generally seen USD/JPY dips supported post the meeting outcomes.
  • The chart below plots USD/JPY in the 10days before and after each meeting outcome (with the pair indexed to 100 on the meeting day). Indeed, on average USD/JPY is around 0.75% higher in the two weeks after BoJ meetings this year.
  • The main two exceptions were the April and July meetings. The July meeting delivered a surprise hike.
  • We could of course see the Ueda led board deliver a surprise hike tomorrow but after the July experience, where Japan asset markets sold off aggressively (in part due to the BoJ move), the central bank may be cautious around delivering another fresh surprise.
  • The general outlook around a resilient US economic backdrop (and the subsequent flow on effect to the Fed), coupled with a gradual BoJ approach to tightening policy, has supported USD/JPY dips in 2024. History may repeat tomorrow if we don't see Ueda hawkish enough relative to current market expectations. 

Fig 1: USD/JPY Performance Around BoJ Meetings This year - Trading Days 

Keep reading...Show less