FX Update: JPY tries to work up a head of steam post-BoJ FX Update: JPY tries to work up a head of steam post-BoJ FX Update: JPY tries to work up a head of steam post-BoJ

FX Update: JPY tries to work up a head of steam post-BoJ

Forex 5 minutes to read
John Hardy

Head of FX Strategy

Summary:  A further rise in US yields yesterday, even at the shorter end of the US yield curve, spooked risk sentiment once again, and a mini-crash in crude oil prices has pressured commodity currencies and spoiled the NOK bulls parade in the wake of the Norges Bank meeting. The most interesting development overnight, however, was the potent rally in the Japanese yen before and after the Bank of Japan announced its policy review.

FX Trading focus: Calming yields overnight boost JPY rally on BoJ

While it was the further yield spike yesterday that reversed the initial reaction to the FOMC meeting that unsettled markets, the combination of easing yield pressures overnight and the Bank of Japan policy review is helping to ignite a revival of the Japanese yen – or at least a respectable consolidation after its long run lower. The three-month policy review has resulted in the bank announcing an expanded range for the 10-year JGB yield, which will be allowed to trade 25 basis points above or below zero. This was more than expected, but is hardly heady stuff if US and other long yields are set to rip higher still in coming months. Somewhat more “hawkish”, the bank announced it will no longer purchase Nikkei 225 ETFs, only buying broader Topix ETFs and it removed the lower bound of purchases, suggesting that it doesn’t have to buy any stocks if it doesn’t want to.

This policy review was launched in the midst of a very different set of circumstances than we see at present and amounts more or less to a “checking of the box” of having carried a review out and a very modest recognition of the changed environment internationally (prospects for opening up and rising yields), but is not hawkish by a long stretch. There may be a trading opportunity or two for a consolidation higher for the JPY after is very long run lower, especially if rates back off for a while and commodities go through a consolidation wave or two. The EURJPY chart is a technical and low-ish beta base case for a bit of consolidation after yesterday’s engulfing candlestick and momentum turning. But beyond the near term of a few one to three weeks, the only chunky up-side scenario for the yen would be a deflationary bust – not where the market is by any stretch of the imagination at the moment. JPY bears close watching as well on the transition to a new financial year after the end of this month.

Odds and ends

TRY holds well after CBT “credibility hike”  - this is a positive sign for TRY that the currency held its rally well yesterday in the wake of the CBT hiking 200 bps vs. 100 bps expected, and the plunge in oil prices is a kicker of a tailwind for the TRY. Another run below 7.00 for USDTRY possible here as long as US yields slow or reverse their rise as well, as long as EM credit remains complacent.

BoE doesn’t stand in the way - the Bank of England meeting came and went yesterday without notable fuss, and the lack of concern on the steep backup in longer term yields of late suggests that the bank retains the same comfort that fiscal stimulus is sufficiently strong in the UK to overwhelm any concern about longer rates rising. EURGBP champing at the bit for more declines – are we set for a run all the way to 0.8300? The market is getting more aggressive in pricing in BoE hikes than Fed hikes for the late 2022 time frame. Local resistance at 1.4000 in GBPUSD quite clear-cut for whether that pair can press higher.

Russia surprises with a hike of 25 bps to 4.50%. This is an aggressive move by the Russian central bank likely linked to the recent sharp sell-off in the ruble on comments from Biden on Russia and Putin, specifically. The hike is getting some respect from the market – though USDRUB trades in the middle of last month’s range.  The inflation rate has moved above the inflation rate in recent months, and the central bank had already signaled incoming hikes, and international investors will treat RUB with extreme caution until the shape of possible US sanctions is known. The key technical line in the sand to the upside is the 75.00 level in USDRUB.

NOK and CAD stopped in their tracks by crude oil meltdown. An overdue oil correction came all at once yesterday and spoiled the NOK bulls party on the very day that the Norges Bank brought forward rate hike expectations, keeping EURNOK well away from the interesting 10.00 area. NOKSEK impressively managed to re-take parity today and offers the sense that as long as the energy market doesn’t fall apart, there may yet be hope that the recent break above 0.9950-1.000 will stick. For CAD, the crude sell-off finally saw USDCAD finding support below 1.2400, and the rebound found resistance just north of 1.2500 (more below)

USDCAD bounce sharply after punching through to new lows no seen since early 2018 on the sharp reversal in crude oil prices. The pair found resistance near the 1.2500 round level and prior low. The USDCAD trend has been persistent for months, although since December each new has been quickly gathered up for a period of consolidation. To provide any sense that the pair is putting in a more significant low, we would need to see a punch rally back to 1.2700-50. Until then, 1.2600 is the next resistance area after 1.2500.

Source: Saxo Group

Graphic: FX Board of G10 + CNH trends and momentum
The trend evolution readings lately are mostly an exercising in watching recent strong trends slow or slightly reverse, as we await signs for whether the USD is going to launch into a full bore rally after its sharp snapback earlier this month, as well as watching how profoundly the commodity currencies will continue to stumble (CAD never suffered as much as other commodity FX recently) and how much further consolidation, if any, the old safe havens JPY and CHF will see to the upside here.

Source: Bloomberg and Saxo Group

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank (Schweiz) AG
The Circle 38

Contact Saxo

Select region


All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.