USD/JPY Fundamental Daily Forecast – Flat as Investors Begin to Price in Fed, BOJ Rate Cuts

The market is saying the Fed will cut rates, and the BOJ has signaled the chance of easing as early as this month. Those two events kind of neutralize each other. That likely means investors will focus on risk today. Demand for risky assets will underpin the USD/JPY. A “risk-off” scenario will pressure the Forex pair.
James Hyerczyk
USD/JPY

The Dollar/Yen is trading flat early Tuesday as investors continue to assess the risks associated with Brexit, a short-term solution to U.S.-China trade issues, and the high probability of a Fed rate cut on October 30, followed by an October 31 rate cut by the Bank of Japan. The Forex pair has essentially traded sideways since October 15 when it spiked higher on stronger-than-expected U.S. bank earnings.

At 06:35 GMT, the USD/JPY is trading 108.604, up 0.002 or 0.00%.

Economic News

There were no economic releases out of Japan overnight, and the U.S. won’t report until the U.S. morning so any price action we are witnessing is being driven by geopolitical events.

As far as the U.S. economy is concerned, at 14:00 GMT, a report on Existing Home Sales is expected to show 5.45 million units were sold last month. This will be down slightly from 5.49 million the previous month. Additionally, the Richmond (FED) Manufacturing Index is expected to come in at -7, slightly better than the previously reported -9. Last month, the report from the Federal Reserve Bank of Richmond showed manufacturing activity across Mid-Atlantic States softened in September.

With the Fed set to meet on October 29-30, its members are on lockdown so we’re not going to hear their opinions this week. As of last Friday, traders have priced in a 93.5% chance of a Fed rate cut next week. However, the FOMC members are just as divided as they were last week.

BOJ’s Kuroda Calls for Mix of Steps to Boost Economic Growth

Bank of Japan Governor Haruhiko Kuroda said on Sunday a mix of monetary easing, flexible fiscal spending and structural reforms to raise the country’s long-term growth potential could be effective in stimulating the economy.

Kuroda said central banks of advanced nations still have sufficient tools to boost growth, countering the view that years of low-growth, low-inflation environment have left them with little ammunition to fight an economic downturn.

But he said fiscal spending and structural reforms to boost an economy’s potential growth will help enhance the effect of monetary easing.

“We are equipped with unconventional tool kits, so there is no need to be too pessimistic about the effectiveness of monetary policy,” Kuroda told a seminar on long-term policy challenges for central banks.

“In responding to significant downward pressure (on growth), a policy mix of monetary easing, flexible fiscal policy and steps to raise the natural rate of interest could be effective.”

Daily Forecast

The market is saying the Fed will cut rates, and the BOJ has signaled the chance of easing as early as this month. Those two events kind of neutralize each other. That likely means investors will focus on risk today. Demand for risky assets will underpin the USD/JPY. A “risk-off” scenario will pressure the Forex pair.

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US