Currency Volatility: Japanese Yen Eyes Upcoming BOJ Rate Decision

JPY CURRENCY VOLATILITY – TALKING POINTS:

• Overnight volatility measures tick higher across JPY currency pairs in anticipation of tomorrows rate review and monetary policy update from the Bank of Japan

• The BOJ will also release its latest outlook for economic activity and prices which looks to accompany a slew of data points such as industrial production and retail trade

• Check out the free DailyFX Q2 JPY Forecast for comprehensive outlook on the Japanese Yen

USDJPY overnight implied volatility jumped to 5.61 percent, a multi-week high, as forex traders gear up for potential price swings in response to the Bank of Japan‘s interest rate decision expected during Thursday’s session.

FOREX MARKET IMPLIED VOLATILITY AND TRADING RANGES

BOJ monetary policy is expected to remain unchanged after its April meeting, however, considering the central bank already announced a reduction to its bond purchase program by 20 billion Yen per month last week. That being said, commentary from BOJ Governor Kuroda – particularly on inflation – will likely be closely examined by markets.

FOREX ECONOMIC CALENDAR – JPY

Visit the DailyFX Economic Calendar for a comprehensive list of upcoming economic events and data releases affecting the global markets.

Aside from the BOJ taking the spotlight in Thursday‘s session, several economic data points may potentially weigh on the Yen’s performance. Forex traders could turn to Japans inflation and jobless rates in addition to year-over-year changes in industrial production and retail trade if no surprises come from the BOJ and Governor Kuroda.

USDJPY PRICE CHART: DAILY TIME FRAME (OCTOBER 31, 2018 TO APRIL 24, 2019)

USDJPY has formed an incredibly tight trading range which has largely contributed to the collapse in currency market volatility. Spot prices appear to have coiled between resistance at the 112.00 handle and support provided by the upward-sloping trendline formed from the low recorded during the Yen flash crash at the beginning of the year.

Tomorrows high-impact event risk could easily serve as a catalyst for overdue volatility and spark a sizeable move outside of current technical levels. That being said, the trading range derived from overnight implied volatility estimates that USDJPY will trade between 111.45 and 112.11 with a 68 percent statistical probability.

USDJPY TRADER SENTIMENT PRICE CHART: DAILY TIME FRAME (OCTOBER 26, 2018 TO APRIL 24, 2019)

Check out IGs Client Sentiment here for more detail on the bullish and bearish biases of EURUSD, GBPUSD, USDJPY, Gold, Bitcoin and S&P500.

According to client positioning data from IG, 38.8 percent of USDJPY traders are net-long resulting in a short to long ratio of -1.58 to 1. However, the number of traders net-long is 15.5 percent higher than yesterday and 10.2 percent higher than last week.