According to Yuji Saito, an executive director at the firm's FX department
Saito says that while the yen has gained following the BOJ's announcement to cuts its 25+ year JGB purchases this morning, USD/JPY is expected to find support at around 107.00.
He notes that the "dollar has also been weighed down by weaker-than-expected Chinese PMI data and seasonal yen-buying flows related to redemption of U.S. Treasuries, which tend to be large in February and August".
Well, it's a similar story to the one we've seen last month and as mentioned before then, the BOJ's focus isn't on the JGB purchases but the yield curve control (YCC) policy.
The BOJ has even come out to clarify that the market operations here are part of a technical adjustment, not a change in monetary policy. But the market is once again taking the news in stride and sending the yen higher.
If the BOJ's "taper" adjustments and the market's reaction is anything to go by, once the BOJ does tighten monetary policy it's going to be a major play in the FX market and the yen strength at the time is going to be something incredible.
The latest CFTC positioning here provides a rough gauge of what's in store for yen pairs if the market is going to shift to the other side of the fence.
