ING’s Chris Turner highlights unusually low USD/JPY volatility despite multiple global risks and key central bank meetings. Their economists warn markets underprice the risk of a Bank of Japan (BoJ) rate hike and possible upward revisions to inflation forecasts. ING sees conditions for an upside USD/JPY breakout, with potential moves toward 160.50 and the 2024 high at 162 if no BoJ surprise hike materializes.

BoJ risk and intervention fears

"Given so many global risks at present, it seems strange that USD/JPY has been able to trace out mostly a two yen trading range through the month of April."

"The Fed and Bank of Japan rate meetings, plus a whole host of data and presumably geopolitical risk, warn of a possible USD/JPY breakout this week."

"For tomorrow morning's Bank of Japan rate meeting, our economists warn that the risk of a BoJ rate hike is underpriced."

"Barring a surprise hike and our view that the Fed meeting could be slightly positive for the dollar, plus oil prices remaining high, USD/JPY could have all the ingredients for an upside breakout this week."

"Close to 160.50 is this year's high. The risk is of a move to the 2024 high of 162, accompanied by higher traded volatility as investors brace for possible Japanese FX intervention."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)