The BOJ comprehensively reformed the financial system in 2016 /2017 by YCC bands, JGB 10 to 3 month, trade weight index, Corporate goods index, PPI and Imports/ exports, Inflation at 2%. Slight yet positive changes occurred to BOJ interest rates.
The current review announced by Ueda is a 25 year comprehensive analysis to factors at work, successes and failures within Japan. The predominant theme of the review is the effect on prices at every step for the past 25 years to financial markets, monetary policy and the overall financial system.
The wider view to prices incorporates questions to globalization, Japan’s aging population, wage and price analysis, effect on corporations and households.
The first workshop begins December to address monetary policy, financial markets and the financial system.
The BOJ established a website in order to follow the overall review at every step along the way.
If YCC bands eliminates then the 10Y to 3 month rates remain and no changes exist to the system. The question of loose or ultra loose policy described by market people exists a question to a valid assessment. The BOJ informs clearly to dates and money spent for purchase and sales of JGB into 2023 and 2024.
The YCC bands are irrelevant to Monetary or any BOJ policy and not worth a discussion. YCC bands maybe viewed as a Forward Guidance for the yield curve at 0.5 to 1.50 where JGB purchases and sales are found and here is found the possible relevance. But anybody can easily view the 3 month to 10 year and factor 0.5 and 1.50.
The two major questions personally. Will the BOJ add daily interest rates or will the current system remain This question determines if USD/JPY remains the same financial instrument or will USD/JPY change its current character to ranges and its relationship to DXY as long ago established by the BOJ.
The BOJ interest rate system is a very special yet different and unique system to the 20 or so central bank interest rates I currently know and understand. To add an interest rate is the same as the ECB for example to slash maturities from 7 to current 5. Eliminate maturities slows the price speed and slashes ranges. In the BOJ example, add an interest rate slows USD/JPY price speeds and compresses ranges.
DXY traded 94 pips this week inside the range from 99.00’s to 102.00’s. DXY next week trades a fairly normal 200 pip range from 99.00’s to many points at 101.00’s. DXY’s next vital low is located at 98.89 and deeply oversold.
EUR/USD continues to trade overbought from 1.0900’s and inside the same range from 1.1129 to 1.1354. Lows achieved 1.1174 this week while 1.1354 becomes massive overbought. EUR/USD challenges 1.1129 on breaks at 1.1186, 1.1157 and 1.1142 then 1.1080 and 1.1024. EUR/USD ranges expand when DXY ranges increase.
Overall Currency markets are slow and range bound due to compressed ranges to DXY and EUR/USD. If DXY and EUR/USD trade condensed ranges then all markets are afflicted by trading small ranges.
USD/JPY broke above 139.31 to trade upper 139.00’s as written Sunday. USD/JPY requires a break at 138.67 to target 137.99, 137.58 and 136.48. USD/JPY current target is 137.99 then eventual 131.00’s. Caution to 141.00 target as the BOJ Export line is located at 141.30. Short only strategy is the only viable option.
EUR/AUD trades overbought next week at 1.6500’s and Richter Scale overbought at 1.6600’s. The eventual targets are found at 1.6204, 1.6067 and 1.5974. Break at 1.6262 is mandatory for a lower EUR/AUD.
Oversold GBP/AUD confronts a vital line at 1.8829. Targets as reported in previous weeks remain at 1.8703, 1.8633 and 1.8541. If GBP/AUD holds at 1.8829 then 1.9100 may trade easily.
EUR/AUD and GBP/AUD operate as short only strategies for best profits.
GBP/USD Completed target at low 1.2900’s and traded to 1.2867. GBP/USD line up operates as follows: 1.2669, 1.2699, 1.2876 and 1.3256. Current range 1.2876 – 1.3256. GBP/USD at 1.2600’s is solid and strong while 1.2876 decides GBP/USD longs and shorts for next week. Overbought and short begins at GBP/USD 1.3000’s.
AUD/USD trades 0.6745 to 0.6908. AUD/USD ranges are severely compressed and will remain condensed for next week. Best AUD/USD target is 0.6851. A higher AUD/USD assists to drops in EUR/AUD and GBP/AUD.
NZD/USD trades a 162 pips range from vital 0.6236 to 0.6398. Overbought begins next week at middle 0.6300’s.
Low and oversold NZD/USD holds downside progress to GBP/NZD and EUR/NZD. NZD/USD strategy is long and shorts for GBP/NZD and EUR/NZD.
GBP/NZD traded this week 2.0800’s to 2.0500’s. Break below 2.0367 targets 2.0188 then 1.9900’s. Next week shorts at 2.0800’s again to target 2.0559 then 2.0463.
Overbought EUR/NZD must break below 1.7591 to target long term destinations at 1.7482, 1.7350 and 1.7301.
GBP/CAD from last week: Must trade minimum 1.7100’s. GBP/CAD traded lows at 1.6949 from 1.7300’s and now sits on solid supports at 1.6961 and 1.6906.
GBP/CAD ranges from 1.6906, 1.6961 to 1.7101, 1.7267 and 1.7499.
EUR/CAD traded 164 pips this week Vs GBP/CAD at 383.
EUR/CAD many and solid supports sit at 1.4400’s, 1.4500’s and 1.4600’s. We’re short next week at upper 1.4700’s to lower 1.4800’s.
GBP/JPY shorts next week at upper 181.00 to lower 182.00’s to target low 179.00’s and 178.00’s.
Overbought EUR/JPY shorts next week at 157.00’s targets 154.00’s then 153.00’s.