USD/JPY made a multi-years high upon the policy change by the Bank of Japan & touched 131.50. But soon after reaching such a high price level, USD/JPY has since retraced back down towards 129.00.
The experts at Credit Suisse believe that this is just a start, and the pair could drop all the way down to 120.00 or even lower. If this turns out to be true, would it remove 900 pips from the USD/JPY, but it will only happen if the US Dollar gets significantly weaker.
These days, the Bank of Japan is in the limelight for its decision to keep its policy intact. By keeping the interest rates lower and not changing the YCC (Yield Curve Control) policy, the JPY has gained strength in the market. For many, this price action is very strange since the natural course of action for the JPY was to go down.
But experts believe that the markets are now speculating that the yield curve control will come to an end in March. But as things stand right now, we still don't know how the BOJ will handle its yield curve control policy at the March meeting.
Based on the price fundamentals of USD/JPY, Credit Suisse believes USD/JPY will enter into sell-mode after every rally during the first quarter. In fact, they believe that the pair has the potential to drop all the way down to 120.00. But the first target set is at 125.00, which is around 400 pips away from the current levels.
For now, the volatility in the USD/JPY is very high, and there are important decisions to be made by both central banks (the US and Japan).
According to Credit Suisse, they don't see any reason for the Bank of Japan to change its policy. Considering how the BOJ was very clear about its stance, all the hopes are now set on the upcoming March meeting.