USD/JPY chops without clear sign for BoJ
July 22 (Reuters) -The yen rose on Monday but rallies ahead of Bank of Japan’s July 31 policy meeting may be fragile until the forex market receives a clearer signal of the BOJ's resolve to hike rates.
Though the data set is small, a feature of Governor Kazou Ueda’s leadership has been source reports in the media telegraphing the BoJ's intent ahead of policy adjustments.
So far, the signals haven't been so clear.
Bloomberg reported on Monday that BoJ officials see weakness in consumer spending complicating their decision about whether to raise rates, while others see risk of missing the chance to hike.
This highlights a key hindrance for the yen. With the BoJ playing the long game when it comes to normalizing policy, it becomes difficult for the currency sustain upside against the high-yielding dollar. In turn, the risks to USD/JPY are to the topside.
For now, the range in the pair remains defined by the 100 and 55-daily MAs at 155.28-157.81. However, as yields once again drift higher, this should keep USD/JPY in the ascendency. Bulls will need a daily close above the 55-DMA to negate alleviate downside momentum with failure to do so likely keeping the door open to test of 155.00-30.
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(Justin McQueen is a Reuters market analyst. The views expressed are his own.)
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