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USD/JPY Fundamental Daily Forecast – BOJ Summary Showed Policymakers Debated Need for Extra Stimulus

We could see an exaggerated move to the downside on Monday due to the absence of the major U.S. players. The daily chart indicates there is room to the downside with 108.690 a potential downside target.
James Hyerczyk
USD/JPY

The Dollar/Yen is trading lower on Monday, driven by profit-taking following last week’s surge to its highest level since May 31. Higher Treasury futures (lower interest rates) and a drop in demand for risky assets are the catalysts behind the move in the Forex pair.

Contributing to the weakness is the light volume in the Forex market due to the bank holiday in the United States. Today is Veterans Day in the U.S. The major exchanges are open but the Treasury market is closed. Additionally, violence in Hong Kong led to risk aversion in Asia, sending investors into the safety of the Japanese Yen

At 10:19 GMT, the USD/JPY is trading 108.963, down 0.280 or -0.26%.

Last week, optimism over a U.S.-China trade deal drove investors out of their hedge positions in U.S. Government debt markets. This sent U.S. Treasury yields sharply higher, making the U.S. Dollar a more attractive asset.

Japanese Economic News

Earlier today, the Bank of Japan released its Summary of Opinions from its last policy meeting on October 31.

The summary showed that Bank of Japan policymakers debated whether extra easing measures were needed to hit the central bank’s inflation target at its last policy meeting as heightened risks threatened a fragile economic recovery.

Some of the BOJ’s nine-member board insisted on the need to communicate to markets the central bank would maintain loose monetary policy given the time need to accelerate inflation to its 2% price goal, the summary of the October 30-31 meeting showed.

One of the members said additional easing measures would be needed “without hesitation” if momentum toward achieving the inflation target falters.

“In the current situation where risks are skewed to the downside, the Bank should continue to examine whether additional monetary easing will be necessary,” another board member was quoted as saying in the summary.

Another board member said the BOJ needed to signal that its policy stance was now further tilted toward monetary accommodation and a “downward bias in the policy rates.”

However, another board member said there had been no increases in risks that the inflation target would not be met.

Daily Forecast

We could see an exaggerated move to the downside on Monday due to the absence of the major U.S. players. The daily chart indicates there is room to the downside with 108.690 a potential downside target.

In other news, Japanese Core Machinery Orders fell 2.9%, completely missing the forecast for a 0.9% increase. The Current Account also came in lower at 1.49 Trillion versus a 1.66 Trillion forecast. The Economy Watchers Sentiment came in at 36.7, lower than the 40.7 estimate.

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