BOJ - watch 102.65 on USD/JPY, a move sustain move above would be bullishGood Morning,
Japanese Yield and USD/JPY are trading higher after BOJ did not cut rates further. For me this doesn’t come as a surprise as you all know I believe that low rates, especially the long end side of the curve must be higher and are doing more damage than good to the economy as a whole. The message from today decision is clear and it is that the rate cut cycles (especially the negative rates) are nearing their end and yield is nearing its lows. The BOJ decision is indicative of focus on steepening the yield curve focus, will be positive for banks and life insurers Companies.
Elsewhere – The USD and Yield is higher also vs the EUR. If the rate cut cycle is over for now the USD should benefit against EUR & JPY on the back of relative yield spreads and a potential rate increase by the Fed (if not later today than in December). The ‘Idea’ of buying US Treasuries on relative terms because other central banks are implementing negative rates and extending monetary easing is becoming a less obvious play. This is especially true when long term yield is trading in zero to negative nominal levels. For the FOMC decision tonight - I would use any dip in the US 10 Year yield towards 1.60 to short Treasury futures as I believe the US 10 Year yield is heading towards 2%.
Have a good day and good luck.
USD/JPY – all eyes at 102.65 level as a break above it would argue for a declining trend breakout and based on the weekly chart will also argue for a low in place.
Daily chart
Weekly chart