The FOMC and the Bank of Japan meeting are scheduled for this week, with USD/JPY trading in the mid-¥153 range. Attention is focused on the future policy stances and currency movements, against the backdrop of expectations for rate hikes in both the US and Japan.
The current fundamental backdrop is described as one in which expectations of rate hikes at the FOMC and the Bank of Japan meeting are strengthening. The projected ranges for this week are approximately ¥152.9 to ¥156.3 for USD/JPY, 1.15671 to 1.16537 for EUR/USD, and ¥177.85 to ¥181.47 for EUR/JPY.
During the week of 7 September, the yen continued to recover despite the coordinated stance of Japan and the US, falling to the low ¥152 range before reversing. On 10 September, USD/JPY moved back into the low to mid-¥154 range, while on 11 September the US 10-year Treasury yield rose to just below 5% following the US CPI release.
The FOMC is scheduled for 16 September and the Bank of Japan meeting for 18 September, with a 0.25% rate hike at each meeting priced in. Attention will focus on comments by Governor Ueda at the Bank of Japan press conference, and the next move among the three current phases could affect the yen exchange rate.
USD/JPY is expected to remain in a long-term downtrend. With the Japan-US interest-rate differential unlikely to change significantly, movements in the 10-year Treasury yield are expected to be the focus going forward. EUR/JPY is showing signs of a downtrend, although overall it appears to be in a sideways to gradually declining phase.
EUR/USD is indicated to remain in an uptrend, but upside is expected to remain constrained amid uncertainty over conditions in Europe. EUR/JPY has fallen below its moving average on the weekly chart, showing signs of shifting into a downtrend.