The Bank of Japan (BOJ) Monetary Policy Meeting has begun today, with the results expected to be announced tomorrow, likely around midday. Following the announcement, BOJ Governor Ueda will hold a press conference.
The market's main scenario is a reduction in government bond purchases from the current 6 trillion yen to 3 trillion yen over a 1-2 year period. As for the key issue of an additional rate hike, the likelihood of it being implemented is seen as 50-50. If a rate hike does occur, the most likely increments are 10 basis points (bp) or 15 bp, with 25 bp being less likely.
There has been observed yen buying, particularly by overseas investors, in anticipation of a rate hike. However, this is primarily driven by short-term speculative funds, often resulting in reversals towards yen depreciation. In the currency options market, the one-week USD/JPY volatility remains at a high level of 14-15%, indicating that movements of 50 pips to 1 yen can occur frequently with even minor triggers.
Given the uncertain nature of tomorrow's announcement, caution is advised regarding the market's reaction. Although it is the last day of Finance Minister Kanda's term, the possibility of government and BOJ intervention timed with the event cannot be ruled out.
Today is likely to be a day of preparation for both long-term and short-term strategies, keeping in mind the high volatility in the USD/JPY market.
Upcoming economic indicators in the overseas market include the U.S. Housing Price Index (May), S&P Case-Shiller Home Price Index (20 cities) (May), JOLTS Job Openings (June), and Conference Board Consumer Confidence Index (July).
No major speaking events are scheduled, as the U.S. FOMC and BOJ decision meetings are imminent. Major U.S. corporate earnings to watch include Pfizer, P&G, Starbucks, AMD, Microsoft, and Pinterest.
The JOLTS Job Openings (June) and Conference Board Consumer Confidence Index (July) scheduled are expected to influence the USD. Pay attention to the flow of the USD following these releases. As for the JPY, the market remains cautious ahead of tomorrow's BOJ decision. My trading strategy will primarily focus on the USD.
