USD/JPY reached a weekly low, breaks beneath 109.50 ahead of BoJ and FOMC meetings

• The market sentiment is mixed as major US stock indexes rise while safe-haven currencies strengthen.
• BoJ Preview: Forecasts from eight major banks, very little surprise potential.
• FOMC: Investors expect the Fed to keep its monetary policy and the QE unchanged.

Earlier during the European session, the USD/JPY pared some of its losses, but as the day progressed, the pair retreated its gains, trading at 109.28, down 0.11% at the time of writing.

The market sentiment is mixed. Major European and American stock indexes recover from yesterday’s losses, buying the so-called “dip.” Nonetheless, on the FX Market, the Swiss franc, the Japanese yen, and the US dollar benefit from safe-haven flows, strengthening as commodity-linked currencies fall.

The US Dollar Index, which measures the performance of six currencies in a basket, is flat during the New York session, at 93.28. The US 10-year Treasury yield sits at 1.314%, unchanged, favoring the Japanese yen against the US dollar.

Central banks of Japan and the US gather to discuss monetary policy

On Wednesday, the Bank of Japan (BoJ) will release its monetary policy statement. The BoJ inflation target is 2%, while its interest rate is at -0.10%. Analysts at different institutions expect the BoJ to keep the rates unchanged, maintain its ETF purchases, and the Yield Curve Control on the 10-year JGB. 

The rationale behind the aforementioned is lower inflationary readings, the Delta outbreak lasting longer than expected, and the change of the LDP leadership.

Read more: BoJ Preview: Forecasts from eight major banks, very little surprise potential

Meanwhile, in the US, the Federal Open Market Committee began its two-day monetary policy meeting on Tuesday. September’s meeting would unveil the monetary policy statement and the Summary of Economic Projections (SEP), including updated economic projections from 2021, 2022, and 2023. Worth of notice, the dot-plot will be updated too. If three FOMC members add to the seven expecting a rate hike for 2022, it could change the prospects of a rate hike from 2023 to the last quarter of 2022.

KEY TECHNICAL LEVELS TO WATCH