USD/JPY eyes Bank of Japan meeting

The Japanese yen continues to have a quiet week. In the North American session, USD/JPY is trading at 153.25, at the time of writing, down 0.07% on the day.

Bank of Japan expected to stay on sidelines

The Bank of Japan concludes its two-day meeting on Thursday and is widely expected to maintain policy settings, including its benchmark rate at 0.25%. The shock result from Sunday’s general election, which saw the ruling Liberal Democratic Party lose its majority, will means weeks of political uncertainty.

The yen weakened to a three-month low after the election but that won’t be enough to prod the BoJ to raise interest rates on Thursday. The BoJ has said in the past that it would not make any rate moves during times of uncertainty, and between the political crisis in Japan and the tight election campaign in the US, it’s a sure bet that policymakers will wait before adjusting rates.

The markets will be keeping a close eye on the BoJ’s quarterly inflation and growth reports, which will be released at the meeting. The BoJ has said that it will hike rates if the economy and prices move in line with these projections, so these projections could provide clues about the BoJ’s future rate path.

Governor Ueda holds a press conference after the meeting, and a reference to the falling yen could signal plans for a rate hike or intervention in the currency markets in the near term.

In the US, first-estimate GDP in the third quarter rose 2.8% y/y, down from 3.0% in Q2 and below the estimate of 3.0%. This points to a strong economy which has been boosted by robust consumer spending. The Federal Reserve meets on Nov. 7 and the markets have widely priced in a 25-basis point cut.

USD/JPY Technical

• USD/JPY is testing support at 153.33. The next support line is 152.80
• 153.92 and 154.45 are the next resistance lines

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