The BoJ decision saw monetary policy tools left as unchanged as expected, providing little in the way of volatility for the Japanese Yen. In turn, the focus will fall upon the FOMC decision scheduled for tomorrow. While I expect the FOMC meeting to be a placeholder at best for the more important June meeting, there is a slight risk of Chair Powell’s press conference leaning more hawkish, in light of the slew of strong US data. As such, in anticipation of this risk, upside pressure on US bond yields could ensue and thus push USD/JPY higher. 

USD JPY 20210427 18.11

According to both Barclays and Citi, month-end rebalancing is expected to see strong USD selling. Although, as has been the case in recent times, the Japanese Yen has also been among the underperformers during month-end and judging by yesterday’s London 4 pm fix related price action, the same pattern of weaker JPY could continue. USD/JPY had fallen for 9 of the last 10 sessions and thus positioning looks to be a lot cleaner in the pair and with Friday’s defence at 107.50, dip-buying may be the state of play for the pair this week.



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