Taisuke Tanaka, Strategist at Deutsche Bank, suggests that there are doubts over risk-on sustainability while the US and Japan are likely to keep their monetary policy unchanged this week. Key Quotes “The USD/JPY is moving within a narrow range of ¥112-114 with the recent easing in risk-off sentiment. The downside seems underpinned by buying on weakness by GPIF. At the same time, the upside has suddenly become heavy at ¥114’s level, with many institutional investors and exporters waiting for the opportunity to sell as hedgers on the rebound. The first big event this week is the two-day BoJ Monetary Policy Meeting (MPM) starting today. Most market participants expect the bank to keep policy unchanged, as it needs to observe the effects of its newly introduced negative interest rate policy for the next few months. The consensus view is for another easing in April, June or July. Of course, we doubt whether BoJ policy could offer a sustainable boost to the USD/JPY unless confidence in the US economy recovers. Another focus this week will be the two-day FOMC meeting from tomorrow. The FOMC is expected to maintain a wait-and-see stance to get a careful look at the US and world economies. The Fed's dovish response amid the recent retreat in risk-off sentiment has helped calm risk markets. Still, even slightly hawkish comments in statements or press conferences can trigger renewed market pessimism, as seen in ECB President Mario Draghi's failed comments last week. The markets remain on edge despite the lessening in risk-off sentiment. Considering the conditions on the US, China, equities and oil markets, we do not believe the improvement in market sentiment will prove lasting. On the USD/JPY, we recommend that Japanese hedgers in particular sell on the rebound at ¥114 or higher rather than buying on weakness at the recent low end of the range (¥110-112)." For more information, read our latest forex news.