USD/JPY Should Fall This Week If The Pattern Happens Again

Sep 19, 2017 at 2:25 PM EDT

The Federal Reserve meets only 8 times a year and the Bank of Japan meets more frequently. What happens when both major central banks make rate decisions in the same week?

The Federal Reserve meets only 8 times a year and the Bank of Japan meets more frequently. What happens when both major central banks make rate decisions in the same week? The team at Credit Agricole notes a clear pattern:

Image result for USD/JPY images

Here is their view, courtesy of eFXnews:

Credit Agricole CIB FX Strategy Research notes that weeks, where BoJ and FOMC meetings have coincided, have led to JPY strength (lower USD/JPY) 10 times out of 11 since January 2016.

Such an outcome, according to CACIB, came mainly as both central banks have tended to disappoint market expectations – the Fed continually being less hawkish than expected and the BoJ less dovish than expected.

“The June 2017 coincidence was the first time this pattern was broken, but only just. A likely lowering of the FOMC’s dot plots is unlikely to be positive for the USD, despite it likely announcing that it is beginning to reduce its balance sheet,” CACIB argues.

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