CitiFX Wire.. Europe has walked in and joined in on the selling USDJPY bandwagon. The low so far is 117.295 which was below the 50% Fib of the recent rally from 115.85 to 118.7 at 117.36. This appears to have just about held and USDJPY is now 117.44.
There’s no bias in our flow, Supply from leveraged and real money has been absorbed mainly by retailers buying the dip.
this from citi as well… USDJPY: Predicted support
“Since October 1998 there have been 25 times when – as was the case this week – USDJPY has broken Monday’s high on Tuesday by at least Y1.1. Of the 25, only 1 went on to close the next day with net losses of more than Y1.25. The equivalent level on Wednesday is 117.25,” says Predicted Markets. It’s now 117.43 after trading down to 117.295.
BoAML on BOJ:
I’ve received several inquiries as to whether the BOJ will lower the IOER rate (10bp). Although technically possible, I think it’s unlikely and I am not aware of any local economist that expects it. Even if the BOJ did cut the IOER (ie. to 5bp), it’s symbolic and has minimal impact on the economy and inflation. It has a negative impact on bank and financial institution earnings so could end up to be more disruptive. It may also have a dampening effect on consumer sentiment if as a result banks cut the rates on term deposits (and other s/t money mkt instruments) however modestly. I think it’s just too unclear the impact and not something the BOJ will easily entertain.
Instead, the BOJ may cut the lending rate on its credit facility (which is NOT the same as easing). My guess is that the BOJ is likely to do the following:
1) Lower their inflation forecast (obviously not easing, but increases the probability down the road…)
2) Adjust the credit facility program, in particular the extend the loan term from 4yrs to 6yrs or even longer… As noted above, it’s possible that they could cut the lending rate on the credit facility (currently 10bp) lower and keep the IOER at 10bp…
The above are technical adjustments and should not impact the markets materially. Nonetheless, in current market conditions such actions could raise future expectations of more material actions and thus possibly be supportive of asset prices.