Credit Agricole CIB FX Strategy Research notes that if USD/JPY holds onto its gains this week, it will be the first weekly rise in USD/JPY since January 2016 during a week when the BoJ and FOMC have each held meetings. (see here)
“Importantly, a big part of the reason behinf this break in pattern was the FOMC sounding more hawkish and pushing US yields higher. The BoJ, however, maintained its commitment to its QQE and yield curve control (YCC) policies.
Risk sentiment also remains stable and a downside pressure on the JPY, but it is worth noting that there is less carry for investors to trade this summer, which could mean less downward pressure on the JPY than in previous quiet periods.
The Fed’s outlining of its balance sheet reduction strategy could lead to steepening in the UST curve, from very flat levels, and weigh on the JPY,” CACIB argues.
Source: Credit Agricole CIB Research
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