The Bank of Japan not to make changes to its monetary policy settings in April. BOJ’s view on the yen decline will be critical amid inflation forecast upgrade. USD/JPY remains poised to retest 129.40, will BOJ aid the bullish move? Following the conclusion of its two-day review meeting on April 28, the Bank of Japan (BOJ) is unlikely to announce any changes to its monetary policy settings. The central bank, however, is expected to upgrade its inflation forecasts amid a fragile economic recovery. BOJ’s views on yen devaluation in focus The BOJ is likely to maintain the benchmark policy rate at -10bps while holding onto its pledge to buy J-REITS at an annual pace of up to JPY180 bln. Japan is witnessing a gradual uptick in inflation towards the central bank's 2% target, in the face of rising material costs. Inflation, however, remains modest when compared with soaring price pressures in other countries while still below pre-pandemic levels. The central bank, therefore, may be in no rush to increase borrowing costs or modify a pledge to keep rates at current or lower levels, Reuters has reported, citing sources familiar with the BOJ’s thinking. Governor Haruhiko Kuroda said last Friday, “the rise of inflation in services has been limited, indicating that inflation in Japan has not been as widespread as in the US.”  The upgrade in its inflation forecasts for this fiscal year in the central bank’s outlook report is well priced in by the market. The main focus will be on the BOJ’s views on the recent sharp devaluation of the yen against the US dollar, which could cloud the nascent economic recovery. A weaker yen serves as a double-edged sword for Japan’s economy, as it makes exports more competitive while on the other hand making energy – most of which has to be imported – and commodities prices more expensive, thus hurting businesses and consumers.  Japanese officials have voiced their concerns about the yen’s decline, citing that the government was closely watching the impact of recent yen falls on Japan's economy and prices ‘with a sense of urgency.’ Japan's Finance Minister Shunichi Suzuki acknowledged earlier this month, “the yen dropping brings more demerits than merits.” Meanwhile, Kuroda noted, “excessive, short-term FX volatility would affect business activity.” The BOJ Chief appears more concerned about the negative impact of the yen devaluation on the economy than rising inflation, at the moment. Kuroda, therefore, maintained that their monetary policy should be aimed at providing accommodative financial conditions to support the achievement of a full-fledged economic recovery.  That said, the central bank is likely to refrain from intervening to stem the yen’s decline even as it has conducted several unlimited fixed-rate purchase operations of Japanese Government Bonds (JGBs) over the past month to defend the yield cap at 0.25%. Trading USD/JPY with BOJ decision Technically, USD/JPY’s daily chart shows that the price is carving out a bull flag formation, in the face of the recent consolidation that followed a vertical rise from March 31. The BOJ decision could help confirm the bull flag if the yen falls further on a dovish stance reassured by the central bank this Thursday. A sustained move above 128.70 will confirm the bullish continuation pattern, opening doors towards the 20-year highs of 129.40 once again. The 14-day Relative Strength Index (RSI) has moved away from extremely overbought territory, offering some hopes for bulls to re-enter. In case of a hawkish pivot from the BOJ or strong verbal intervention, USD/JPY could breach the falling trendline support at 126.70. A daily close below the latter will invalidate the bullish formation, prompting bears to resume the correction towards the bullish 21-Daily Moving Average (DMA) at 125.56. USD/JPY: Daily chart

EUR/USD - 1.0640 Although euro's selloff below 1.0698 (Monday) to 1.0637 in New York yesterday, then intra-day break there to a 5-year bottom at 1.0636 in Australia on continued usd's strength suggests marginal weakness is seen, oversold condition should prevent steep fall today and yield a much-needed correction, above 1.0698 would head back to 1.0720 later. On the downside, only a daily close below 1.0600/10 may dampen bullish prospect of view and risk further weakness towards 1.0571 before rebound. Data to be released on Wednesday Australia CPI, Germany Gfk consumer sentiment. Italy trade balance, Swiss investor sentiment. U.S. MBA mortgage application, goods trade balance, wholesale inventories and pending home sales.

Overview: The recovery attempt of risk appetites, reflected in the recovery and strong close in US stocks yesterday was dealt a blow by Russia's Foreign Minister's warning of a "serious" danger of nuclear conflict.  In Asia-Pacific, most of the large equity markets advanced.  China was an exception even though the currency snapped a five-day slide following the hike in foreign currency reserve requirements announced yesterday.  Australia's resource companies led the ASX to its largest loss (~2%) since Russia's invasion of Ukraine two months ago.  European shares are trying to stabilize after the Stoxx 600 fell by 3.6% over the past two sessions. US futures are softer.  The US 10-year yield is a few basis points lower around 2.79%. European benchmark yields are slightly softer. The dollar is mostly firmer, though the Antipodean and yen have edged higher.   The euro's loss has been extended deeper into the $1.06-handle and sterling still struggles to sustain modest upticks.  Among emerging market currencies, several Asia Pacific currencies, in addition to the yuan have traded better.  European currencies are taking the brunt.  Gold closed below $1900 yesterday for the first time since late February and is straddling that area in quiet turnover.  June WTI stabilized after falling to around $95.30 yesterday.  An attempt on the upside stalled in front of $100. US natgas is up 3.5% after yesterday's 2% advance.  Europe's benchmark is off 1.7% after falling nearly 8% over the past two sessions.  Iron ore stabilized, rising by about 1.6% earlier today after dropping almost 9.7% yesterday. Copper is also trying to steady.  It fell by more than 5% Friday-Monday. Poor planting news is helping July wheat rise 2.1% after falling for the past five sessions.   Asia Pacific The PBOC cut the reserve requirement for foreign currency deposits in a clear sign of concern about the yuan, which had fallen sharply and was trading near 17-month lows.  The 1% cut was more symbolic than substantive.  It had lifted the reserve requirements twice last year for the first time in a decade and each move was 200 bp.  Ostensibly, the reduced reserve requirements boost the local supply of dollars and other currencies.  The Politburo's quarterly meeting is expected to announce new measures to support the economy and counter the effect of the lockdown.  Some industries are being allowed to re-open in Shanghai, while the lockdown continues, including autos and semiconductor producers.  Universal testing is required in Beijing and some fear that the testing is a prelude to a lockdown.  Some districts have already restricted movement.   There are four developments in Japan to note.  First, Finance Minister Suzuki denied reports that he discussed the possibility of intervention with US Treasury Secretary Yellen.  The initial press reported from Tokyo said that such a discussion was "likely," but in later reiterations in what seemed like an echo chamber, it become a definite.  Given the assessment by the IMF's regional head that the yen's gains reflected fundamentals, and the US efforts to rein in prices, the bar to intervention is high.  Second, the Japanese labor market improved marginally last month.  The unemployment rate unexpectedly eased to 2.6% from 2.7% and the job-to-application ratio ticked up to 1.22 from 1.21.  Third, the BOJ's defense of the 0.25% 10-year yield cap had it buy JPY921.5 bln today, its largest purchase in nearly four years.  Moreover, it extended its fix-rate purchases for the next two days, which carries it through the BOJ meeting.  Fourth, the government's support measures for the economy are taking shape.  A JPY6.2 trillion (~$48.5 bln) package that will be funded by an additional budget and tapping into the fiscal reserves will be submitted.  The economic objective is to help curb the rise in energy prices, ensure stable food supplies, support small and medium-sized businesses, and help struggling families.  The current Diet session ends in mid-June ahead of the upper house elections. The dollar made a marginal new five-day low against the Japanese yen near JPY127.35.  Buyers stepped in the middle of the Asia Pacific session and retested the session high around JPY128.20.  It is consolidating in the European morning.  The nearly 20 bp pullback in the US 10-year yield from last week's highs has helped to blunt the upside pressure.  A break of the JPY127.25 area could spur a move toward JPY126.75 initially.  On the upside, the greenback may be capped around JPY128.40.  The Australian dollar has stabilized after falling from about $0.7560 four sessions ago to $0.7135 yesterday.  It needs to rise above $0.7260 now to signal a correction is at hand.  And even then, the $0.7300 area may prove to be formidable resistance.  While the Chinese yuan snapped its losing streak, it still looks fragile and the relative wide range (~CNY6.5275-CNY6.5610) suggests the market remains unsettled.  The dollar traded inside yesterday's range.  The PBOC set the dollar's reference rate today at CNY6.5590, slightly below the median...

Overview: The recovery attempt of risk appetites, reflected in the recovery and strong close in US stocks yesterday was dealt a blow by Russia's Foreign Minister's warning of a "serious" danger of nuclear conflict.  In Asia-Pacific, most of the large equity markets advanced.  China was an exception even though the currency snapped a five-day slide following the hike in foreign currency reserve requirements announced yesterday.  Australia's resource companies led the ASX to its largest loss (~2%) since Russia's invasion of Ukraine two months ago.  European shares are trying to stabilize after the Stoxx 600 fell by 3.6% over the past two sessions. US futures are softer.  The US 10-year yield is a few basis points lower around 2.79%. European benchmark yields are slightly softer. The dollar is mostly firmer, though the Antipodean and yen have edged higher.   The euro's loss has been extended deeper into the $1.06-handle and sterling still struggles to sustain modest upticks.  Among emerging market currencies, several Asia Pacific currencies, in addition to the yuan have traded better.  European currencies are taking the brunt.  Gold closed below $1900 yesterday for the first time since late February and is straddling that area in quiet turnover.  June WTI stabilized after falling to around $95.30 yesterday.  An attempt on the upside stalled in front of $100. US natgas is up 3.5% after yesterday's 2% advance.  Europe's benchmark is off 1.7% after falling nearly 8% over the past two sessions.  Iron ore stabilized, rising by about 1.6% earlier today after dropping almost 9.7% yesterday. Copper is also trying to steady.  It fell by more than 5% Friday-Monday. Poor planting news is helping July wheat rise 2.1% after falling for the past five sessions.   Asia Pacific The PBOC cut the reserve requirement for foreign currency deposits in a clear sign of concern about the yuan, which had fallen sharply and was trading near 17-month lows.  The 1% cut was more symbolic than substantive.  It had lifted the reserve requirements twice last year for the first time in a decade and each move was 200 bp.  Ostensibly, the reduced reserve requirements boost the local supply of dollars and other currencies.  The Politburo's quarterly meeting is expected to announce new measures to support the economy and counter the effect of the lockdown.  Some industries are being allowed to re-open in Shanghai, while the lockdown continues, including autos and semiconductor producers.  Universal testing is required in Beijing and some fear that the testing is a prelude to a lockdown.  Some districts have already restricted movement.   There are four developments in Japan to note.  First, Finance Minister Suzuki denied reports that he discussed the possibility of intervention with US Treasury Secretary Yellen.  The initial press reported from Tokyo said that such a discussion was "likely," but in later reiterations in what seemed like an echo chamber, it become a definite.  Given the assessment by the IMF's regional head that the yen's gains reflected fundamentals, and the US efforts to rein in prices, the bar to intervention is high.  Second, the Japanese labor market improved marginally last month.  The unemployment rate unexpectedly eased to 2.6% from 2.7% and the job-to-application ratio ticked up to 1.22 from 1.21.  Third, the BOJ's defense of the 0.25% 10-year yield cap had it buy JPY921.5 bln today, its largest purchase in nearly four years.  Moreover, it extended its fix-rate purchases for the next two days, which carries it through the BOJ meeting.  Fourth, the government's support measures for the economy are taking shape.  A JPY6.2 trillion (~$48.5 bln) package that will be funded by an additional budget and tapping into the fiscal reserves will be submitted.  The economic objective is to help curb the rise in energy prices, ensure stable food supplies, support small and medium-sized businesses, and help struggling families.  The current Diet session ends in mid-June ahead of the upper house elections. The dollar made a marginal new five-day low against the Japanese yen near JPY127.35.  Buyers stepped in the middle of the Asia Pacific session and retested the session high around JPY128.20.  It is consolidating in the European morning.  The nearly 20 bp pullback in the US 10-year yield from last week's highs has helped to blunt the upside pressure.  A break of the JPY127.25 area could spur a move toward JPY126.75 initially.  On the upside, the greenback may be capped around JPY128.40.  The Australian dollar has stabilized after falling from about $0.7560 four sessions ago to $0.7135 yesterday.  It needs to rise above $0.7260 now to signal a correction is at hand.  And even then, the $0.7300 area may prove to be formidable resistance.  While the Chinese yuan snapped its losing streak, it still looks fragile and the relative wide range (~CNY6.5275-CNY6.5610) suggests the market remains unsettled.  The dollar traded inside yesterday's range.  The PBOC set the dollar's reference rate today at CNY6.5590, slightly below the median...

Overview: The recovery attempt of risk appetites, reflected in the recovery and strong close in US stocks yesterday was dealt a blow by Russia's Foreign Minister's warning of a "serious" danger of nuclear conflict.  In Asia-Pacific, most of the large equity markets advanced.  China was an exception even though the currency snapped a five-day slide following the hike in foreign currency reserve requirements announced yesterday.  Australia's resource companies led the ASX to its largest loss (~2%) since Russia's invasion of Ukraine two months ago.  European shares are trying to stabilize after the Stoxx 600 fell by 3.6% over the past two sessions. US futures are softer.  The US 10-year yield is a few basis points lower around 2.79%. European benchmark yields are slightly softer. The dollar is mostly firmer, though the Antipodean and yen have edged higher.   The euro's loss has been extended deeper into the $1.06-handle and sterling still struggles to sustain modest upticks.  Among emerging market currencies, several Asia Pacific currencies, in addition to the yuan have traded better.  European currencies are taking the brunt.  Gold closed below $1900 yesterday for the first time since late February and is straddling that area in quiet turnover.  June WTI stabilized after falling to around $95.30 yesterday.  An attempt on the upside stalled in front of $100. US natgas is up 3.5% after yesterday's 2% advance.  Europe's benchmark is off 1.7% after falling nearly 8% over the past two sessions.  Iron ore stabilized, rising by about 1.6% earlier today after dropping almost 9.7% yesterday. Copper is also trying to steady.  It fell by more than 5% Friday-Monday. Poor planting news is helping July wheat rise 2.1% after falling for the past five sessions.   Asia Pacific The PBOC cut the reserve requirement for foreign currency deposits in a clear sign of concern about the yuan, which had fallen sharply and was trading near 17-month lows.  The 1% cut was more symbolic than substantive.  It had lifted the reserve requirements twice last year for the first time in a decade and each move was 200 bp.  Ostensibly, the reduced reserve requirements boost the local supply of dollars and other currencies.  The Politburo's quarterly meeting is expected to announce new measures to support the economy and counter the effect of the lockdown.  Some industries are being allowed to re-open in Shanghai, while the lockdown continues, including autos and semiconductor producers.  Universal testing is required in Beijing and some fear that the testing is a prelude to a lockdown.  Some districts have already restricted movement.   There are four developments in Japan to note.  First, Finance Minister Suzuki denied reports that he discussed the possibility of intervention with US Treasury Secretary Yellen.  The initial press reported from Tokyo said that such a discussion was "likely," but in later reiterations in what seemed like an echo chamber, it become a definite.  Given the assessment by the IMF's regional head that the yen's gains reflected fundamentals, and the US efforts to rein in prices, the bar to intervention is high.  Second, the Japanese labor market improved marginally last month.  The unemployment rate unexpectedly eased to 2.6% from 2.7% and the job-to-application ratio ticked up to 1.22 from 1.21.  Third, the BOJ's defense of the 0.25% 10-year yield cap had it buy JPY921.5 bln today, its largest purchase in nearly four years.  Moreover, it extended its fix-rate purchases for the next two days, which carries it through the BOJ meeting.  Fourth, the government's support measures for the economy are taking shape.  A JPY6.2 trillion (~$48.5 bln) package that will be funded by an additional budget and tapping into the fiscal reserves will be submitted.  The economic objective is to help curb the rise in energy prices, ensure stable food supplies, support small and medium-sized businesses, and help struggling families.  The current Diet session ends in mid-June ahead of the upper house elections. The dollar made a marginal new five-day low against the Japanese yen near JPY127.35.  Buyers stepped in the middle of the Asia Pacific session and retested the session high around JPY128.20.  It is consolidating in the European morning.  The nearly 20 bp pullback in the US 10-year yield from last week's highs has helped to blunt the upside pressure.  A break of the JPY127.25 area could spur a move toward JPY126.75 initially.  On the upside, the greenback may be capped around JPY128.40.  The Australian dollar has stabilized after falling from about $0.7560 four sessions ago to $0.7135 yesterday.  It needs to rise above $0.7260 now to signal a correction is at hand.  And even then, the $0.7300 area may prove to be formidable resistance.  While the Chinese yuan snapped its losing streak, it still looks fragile and the relative wide range (~CNY6.5275-CNY6.5610) suggests the market remains unsettled.  The dollar traded inside yesterday's range.  The PBOC set the dollar's reference rate today at CNY6.5590, slightly below the median...

Overview: The recovery attempt of risk appetites, reflected in the recovery and strong close in US stocks yesterday was dealt a blow by Russia's Foreign Minister's warning of a "serious" danger of nuclear conflict.  In Asia-Pacific, most of the large equity markets advanced.  China was an exception even though the currency snapped a five-day slide following the hike in foreign currency reserve requirements announced yesterday.  Australia's resource companies led the ASX to its largest loss (~2%) since Russia's invasion of Ukraine two months ago.  European shares are trying to stabilize after the Stoxx 600 fell by 3.6% over the past two sessions. US futures are softer.  The US 10-year yield is a few basis points lower around 2.79%. European benchmark yields are slightly softer. The dollar is mostly firmer, though the Antipodean and yen have edged higher.   The euro's loss has been extended deeper into the $1.06-handle and sterling still struggles to sustain modest upticks.  Among emerging market currencies, several Asia Pacific currencies, in addition to the yuan have traded better.  European currencies are taking the brunt.  Gold closed below $1900 yesterday for the first time since late February and is straddling that area in quiet turnover.  June WTI stabilized after falling to around $95.30 yesterday.  An attempt on the upside stalled in front of $100. US natgas is up 3.5% after yesterday's 2% advance.  Europe's benchmark is off 1.7% after falling nearly 8% over the past two sessions.  Iron ore stabilized, rising by about 1.6% earlier today after dropping almost 9.7% yesterday. Copper is also trying to steady.  It fell by more than 5% Friday-Monday. Poor planting news is helping July wheat rise 2.1% after falling for the past five sessions.   Asia Pacific The PBOC cut the reserve requirement for foreign currency deposits in a clear sign of concern about the yuan, which had fallen sharply and was trading near 17-month lows.  The 1% cut was more symbolic than substantive.  It had lifted the reserve requirements twice last year for the first time in a decade and each move was 200 bp.  Ostensibly, the reduced reserve requirements boost the local supply of dollars and other currencies.  The Politburo's quarterly meeting is expected to announce new measures to support the economy and counter the effect of the lockdown.  Some industries are being allowed to re-open in Shanghai, while the lockdown continues, including autos and semiconductor producers.  Universal testing is required in Beijing and some fear that the testing is a prelude to a lockdown.  Some districts have already restricted movement.   There are four developments in Japan to note.  First, Finance Minister Suzuki denied reports that he discussed the possibility of intervention with US Treasury Secretary Yellen.  The initial press reported from Tokyo said that such a discussion was "likely," but in later reiterations in what seemed like an echo chamber, it become a definite.  Given the assessment by the IMF's regional head that the yen's gains reflected fundamentals, and the US efforts to rein in prices, the bar to intervention is high.  Second, the Japanese labor market improved marginally last month.  The unemployment rate unexpectedly eased to 2.6% from 2.7% and the job-to-application ratio ticked up to 1.22 from 1.21.  Third, the BOJ's defense of the 0.25% 10-year yield cap had it buy JPY921.5 bln today, its largest purchase in nearly four years.  Moreover, it extended its fix-rate purchases for the next two days, which carries it through the BOJ meeting.  Fourth, the government's support measures for the economy are taking shape.  A JPY6.2 trillion (~$48.5 bln) package that will be funded by an additional budget and tapping into the fiscal reserves will be submitted.  The economic objective is to help curb the rise in energy prices, ensure stable food supplies, support small and medium-sized businesses, and help struggling families.  The current Diet session ends in mid-June ahead of the upper house elections. The dollar made a marginal new five-day low against the Japanese yen near JPY127.35.  Buyers stepped in the middle of the Asia Pacific session and retested the session high around JPY128.20.  It is consolidating in the European morning.  The nearly 20 bp pullback in the US 10-year yield from last week's highs has helped to blunt the upside pressure.  A break of the JPY127.25 area could spur a move toward JPY126.75 initially.  On the upside, the greenback may be capped around JPY128.40.  The Australian dollar has stabilized after falling from about $0.7560 four sessions ago to $0.7135 yesterday.  It needs to rise above $0.7260 now to signal a correction is at hand.  And even then, the $0.7300 area may prove to be formidable resistance.  While the Chinese yuan snapped its losing streak, it still looks fragile and the relative wide range (~CNY6.5275-CNY6.5610) suggests the market remains unsettled.  The dollar traded inside yesterday's range.  The PBOC set the dollar's reference rate today at CNY6.5590, slightly below the median...