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USD/JPY: how to trade the BOJ meeting?

By Kira Iukhtenko

The next Bank of Japan meeting is scheduled to take place on Thursday, April 28. How will the event impact the FX market?

To ease or not to ease?

Analysts all over the world differ in their forecast these days. The majority agrees that the economic conditions urge the Japanese regulator to launch more stimulus on Thursday. “We expect aggressive easing from the BOJ this week,” experts at Morgan Staley said this week. "The BOJ will cut its rate on excess commercial-bank deposits to at least minus 0.2% and perhaps to minus 0.3% from minus 0.1%".

However, some economists expect the BOJ to hold fire for now. I personally support this viewpoint: the central bank needs to spend more time to analyze the effect of the most recent measures. 

Technical picture

USD/JPY is consolidating in a narrow 110.60/111.60 range since the beginning of the week. Traders prefer staying out of the market ahead of the FOMC and BOJ meetings. Technically, I see space for more bullish recovery towards 113.50 this week, but, as I've already said, the game of central banks could change the picture dramatically. The Fed will likely put pressure on USD/JPY (if no hints on the June hike given). Vice versa, the BOJ could boost the pair to our target at 113.50 if gives any hopes for more easing to follow... The question is whether it gives or not.



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