The Mexican peso is stable against the Japanese yen on Thursday, as we wait for the Bank of Japan interest rate decision.
MXN/JPY
The Mexican peso continues to see a bit of support against the Japanese yen, and the large, psychologically important figure of 9.00 continues to be an area where buyers are interested. As we head toward the Bank of Japan interest rate decision, this is a pair that I'll be watching. I think it is a little bit of a sleeper trade, if you will, as there are multiple different things going on at the same time.
Top Regulated Brokers
The most obvious one is going to be the fact that the interest rate differential favors Mexico quite wildly
That isn't going to change anytime soon, even if the Japanese do, in fact, raise rates and suggest that maybe they could going forward. The market continues to see pretty sideways action in the short term, but we have reached an oversold position as far as the Stochastic Oscillator is concerned. We have the 9.00 level offering support, and we also have the 200-day EMA sitting in that same area.
Ultimately, the other thing besides interest rates that I'll be paying attention to is the oil market. Remember, Japan has to import all of its crude oil, while Mexico produces crude oil. The interest rate differential and the crude oil exports coming out of Mexico both add up for a bullish setup and a fairly attractive situation.
That being said, the Japanese central bank could signal that they are going to remain very hawkish, and if that's the case, we probably break down below the 9.00 level and possibly go looking to the 8.80 level. That's an area that had been supported previously in the beginning part of the year. Anything below there then changes the trend.
Ultimately, though, the swap alone might be worth hanging on to this if we get any signs of stability after that announcement.
Begin trading our daily forecasts and analysis. Here is a list of Forex brokers in Japan to work with.