By ForexTime
The Japanese Yen is expected to be one of the most volatile G10 currencies versus the USD over the next one-week.
This could be based on the Bank of Japan and the Federal Reserve holding policy meetings on the same day!
Beyond central banks, top-tier economic data and global trade developments will be in focus:
Monday, 17th March
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Tuesday, 18th March
Wednesday, 19th March
Thursday, 20th March
Friday, 21st March
At the time of writing, the Yen depreciated across the board despite Japan’s largest labour union – Rengo securing a 5.46% average gain, its largest pay hike since 1991. This could be a “sell the news” scenario with prices stabilizing down the line.
Nevertheless, the Yen is the 3rd best performing G10 currency versus the dollar year-to-date. These gains are on the back of global trade fears and growing bets around the BoJ hiking rates sooner rather than later.
Looking at the weekly charts, the USDJPY is respecting a bearish channel – but support can be seen at 146.50.
With all the above said, here is why the USDJPY is set for a big week:
President Donald Trump’s aggressive stance on trade has roiled markets, sending investors rushing toward safe-haven assets.
Trump recently threatened a 200% tariff on European alcohol after the EU imposed tariffs on US-produced whiskey.
Markets widely expect the BoJ to leave interest rates unchanged at its meeting on Wednesday 19th March.
But if the BoJ hints at a potential hike as soon as May or in the first half of 2025 in the face of higher wages, this could move the Yen.
To be clear, traders are currently pricing in a 16% probability of a 25-basis point hike by May with this jumping to 48% by June.
Over the past 12 months, the BoJ decision has triggered upside moves as much as 1.4% or declines of 1.5% in a 6-hour window post-release.
Note: Beyond the BoJ decision, Japan’s latest inflation print later in the week could influence BoJ hike bets – moving the Yen as a result.
The Federal Reserve is seen leaving interest rates unchanged at its meeting on Wednesday, 19th March.
So, all eyes will be on Fed Chair Jerome Powell’s press conference for clues on future policy moves. Last Friday, Powell stated that the US economy was in a good place despite the elevated levels of uncertainty. However, investors remain fearful of Trump’s trade war hitting the US economy.
Traders are currently pricing in a 35% probability of a 25-basis point cut by May with a move fully priced in by June.
Over the past 12 months, the Fed decision has triggered upside moves as much as 0.7% or declines of 1.2% in a 6-hour window post-release.
The USDJPY has shed over 1% month-to-date with prices trading below the 50, 100 and 200-day SMA.
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