Bank of Japan

Leading the recovery in Asian stock markets yesterday, the Nikkei 225 finished the day 2.08% higher at 28517, boosted by strong gains in semiconductor stocks, including Tokyo Electron and Advantest.

Yesterday, we highlighted the upcoming BOJ meeting and its possible impact on GBP/JPY (see “Will the BOJ Bring a Trick or a Treat for GBP/JPY?”), but NZD/JPY is also at an interesting technical juncture.

Kicking off the busy turn-of-the-month week for economic data, the Bank of Japan will conclude its monetary policy meeting early in Wednesday’s Asian session.

There was a central bank meeting today, but you’d be excused for not noticing.

As my colleague Fawad Razaqzada noted on Friday, this week promises to be an interesting one for FX traders, with the Bank of England, Bank of Japan, Federal Reserve all set to meet, in addition to the always-noteworthy monthly Non-Farm Payrolls report on Friday.

It has been quite rare to associate the word ‘interesting’ when it comes to the recent Bank of Japan and Bank of England policy decisions, but the outcome of these meetings could turn out to be just that.

Gold faces an important few days as three major central banks announce their respective policy decisions. All bar one is expected to make a rate change and that’s the Federal Reserve today.

Following the conclusion of the ECB’s press conference earlier today, the euro gave up its entire gains before breaking down to head lower across the board.

The yen has weakened across the board in the past month, falling against both the euro and US dollar. The yen has fallen especially quickly against the sharply rebounding dollar, boosting USD/JPY well above key previous resistance around 108.00 this past week.

With both the European Central Bank (ECB) and Bank of Japan (BoJ) issuing monetary policy decisions this week, the EUR/JPY currency pair will clearly be a center of focus for FX traders.

The past week has seen a sharp rise in US Treasury yields, which has helped to fuel a US dollar rebound as well as place renewed pressure on recently rallying equity markets.

Two primary catalysts for the return of sharply elevated market volatility emanated from the U.S. – Fed Chair Jerome Powell’s hawkish testimony in front of the US Congress, and US President Trump’s announcement regarding sizeable import tariffs on steel and aluminum.

Like the cable, the GBP/JPY has also rallied sharply into its own corresponding pre-Brexit resistance level of 155.00. But unlike the cable, which managed to bounce back during the European session, the GBP/JPY has remained low.

The Bank of Japan and European Central Bank are both scheduled to announce their latest monetary policy decisions this week – on Tuesday and Thursday, respectively. EUR/JPY will therefore be a logical focus of currency markets this week just as global central bankers, finance ministers, top government officials and business leaders will meet in Davos, Switzerland for the highly anticipated World Economic Forum.

The market’s main focus remains fixated on developments in Washington.