The USD/JPY has rebounded from the 116 lows and looks to continue upwards trend.
There are fundamental reasons we should expect Yen to weaken:
- Taro Aso (Japanese Finance Minister) has changed his cautious rhetoric from scepticism regarding monetary easing to acting "without hesitation".
- rate was at 0.3% in December, barely avoiding negative values.
- That is while the target is at 2%. And achievement in 2014 creates pressure to turn around 2016, so that 2015 dynamics are not repeated.
Potential rebound of oil prices may not help figures, but its unlikely that Japanese will rest its hopes on that fact. Should fail to introduce any measures we could see the cross trading sideways in 116-119 range waiting for action from Fed or BOJ.
It is most likely that trading will be range bound until the meeting, but if 119 is to break we are likely to experience buy the rumour, sell the fact scenario.