The USD/JPY currency pair is still in a sideways holding pattern close to the key round number of 143.00. Traders looking ahead to a key policy decision by the Bank of Japan, due later this Thursday, were especially focused on the data. The outcome of this decision will have an enormous influence on this important currency pair. Since it has been fighting to keep the ground it’s gained over the last two days.
Currently USD/JPY is treading water as seen in the chart below. Traders are pulling their punches, waiting to see what’s announced from the Bank of Japan. The pair has been showing recent positive movements since yesterday, but it has not fully taken advantage of it. This more timid approach largely mirrors the attitude of market players.
USD/JPY has eked out a modest gain over the last trading sessions, though the pair has recently found its footing near the 143.00 level. Traders are probably just sitting on their hands with their positions. They’re looking for stronger hints as to the direction of the BoJ’s monetary policy. Market participants say that among finite decisions, this one will have the biggest impact on investor sentiment, as well as market dynamics.
A misreading of the BoJ’s policy meeting is making a splash. AT&T’s resumption of net subscriber losses would similarly create fresh tectonic instability within the U.S. foreign exchange market. Speculators are waiting to see what the Fed does about interest rates and monetary stimulus. That’s why they watch changes in the Japanese economy closely.
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The market is jittery as it waits for the BoJ to announce its next course of action. Speculation swirls about whether the central bank will continue to maintain ultra-loose monetary policy or begin signaling that it is moving in that direction. This uncertainty has led to a cautious atmosphere among traders, with many choosing to wait for additional guidance before making significant trading decisions.
In addition to creating tension in the USD/JPY directly, the risk surrounding the decision creates ripples across the rest of the currency pairs. Traders will need to be especially attentive to all developments in the run-up to that announcement. As outlined above, market reactions can be swift and profoundly consequential.