Yen Rallies On Fresh BoJ Speculation

USD/JPY was in focus post the Asia close on Monday, dipping sharply as Nikkei headlines surfaced ahead of the Bank of Japan decision today. Reports the BOJ may allow further flexibility in yield movements bolstered the Yen and saw USD/JPY fall from around 149.75 all the way down to fresh lows of 148.81. We stabilized somewhat into the NY close, the pair last tracking near 149.05.

• Recall from last week that our policy team wrote that an "option is that the BOJ maintains the cap at 1.0%, but tolerates a move in a range of +/-0.5pp" - which may fulfil some of the conditions outlined in the Nikkei piece. See our full BOJ preview here. The majority of sell-side analysts don't expect any major moves today, but the Nikkei piece has renewed focus on today's outcome.
• Note prior to the outcome we get jobless rate data, retail sales and IP figures. Later on, housing start figures are due.
• In terms of technicals, the 20-day EMA has been breached, exposing the 50-day EMA as next support, at 147.98. Monday highs were around 149.85.
• Also note we have some option expiries today (NY cut) - 148.45-65($1.1bln), 150.00-15($1.3bln), which may impact spot moves.