USD/JPY: slightly offered in Tokyo, awaiting FOMC/BoJ

Currently, USD/JPY is trading at 114.92, up 0.03% on the day, having posted a daily high at 114.99 and low at 114.82.

While the US dollar index is up 0.1%, there was little action in USD/JPY that ranged sideways between 114.50 and 114.90.However, the yield on the benchmark 10-year Treasury note had its best daily closing since September 2014 at 2.626% (+1.7%). This followed the market pricing for a March hike that moved higher again. April Fed fund futures at 0.885% implying a 105% chance of a rate hike on Wednesday. 

BOJ to stay committed – Nomura

While markets are made up on the FOMC, the BoJ is a slightly harder one to call. Analysts at UOB do not expect any changes from the Central Bak, explaining that the BoJ is perhaps most notorious among the major central banks for prematurely declaring victory. "Recent public comments by BoJ officials suggesting an exit from deflation risk may be furthering this tendency." 

However, some analysts noted that there is considerable speculation that surrounds the potential for changes at the BoJ, including a possible shift to a 10Y yield target range from the current 0% level," explained analysts at Scotiabank, adding, "The 80trn annual pace of JGB purchases also appears to be up for consideration. Both changes would be JPY-supportive relative to the current stance."

USD/JPY levels

USD/JPY has been consolidating since the pair bounced modestly from a major Fibonacci support, the 23.6% retracement of the November/December rally around 114.50, as noted by Valeria Bednarik, chief analyst at FXStreet. However adding, "But technical readings in the 4 hours chart fail to provide a clear sign on what's next, as technical indicators hover around their midlines, whilst the large moving averages remain pretty much flat and converging within a tight range well below the current level."