Halister News

(Bloomberg) -- Declining Japanese inflation is unlikely to lift USD/JPY near term as further BOJ easing looks remote for now while implied vols and market positions suggest more rangebound days ahead, Bloomberg strategist David Finnerty writes.

• September CPI is forecast to fall 0.5% y/y, according to median est. of economists in Bloomberg survey
  • CPI ex-food, energy expected to rise 0.1% y/y from 0.2% y/y in Aug.; data due Oct. 28 at 8:30am local time
• USD/JPY has traded predominantly within 100.00-105.00 range since early August
  • 1-mo. implied volatility remains just above a 7-month low and is currently forecasting 72% probability it will remain within 101.27-107.13 range over next month; spot currently at 104.30
  • Leveraged funds net long JPY position has been cut from 64,179 contracts in week ended Sept. 27 to 24,321 in the three weeks to Oct. 18 as funds switch to a more neutral stance on the FX pair, indicating reduced speculation USD/JPY will move beyond current range near term
• BOJ tweaked monetary policy in September to include yield curve control; under Governor Kuroda, policy changes have been followed by at least eight months of no further adjustments as the central bank monitored effectiveness of its last measures
• Central bank releases its latest Outlook report at the upcoming meeting and Gov. Kuroda has indicated that BOJ may extend the timeline to reach its 2% inflation goal again
• NOTE: David Finnerty is an FX strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.