Selling the dollar for the yen was the main trade idea at Morgan Stanley as of end-March as investors await confirmation of a soft or hard landing scenario for the U.S. economy. Hedging the risks associated with those expectations by shorting the dollar/yen from MS’s perspective “seemed like the most appropriate position while we wait for clarity,” according to U.S. bank’s Fx strategists, however, so far that strategy looked as muted.

During the trading week, the USD initially fell to a low of ￥131, certainly a psychologically significant level and one that we have seen support in a number of previous episodes. The market immediately reversed to show “signs of life”, and we ended up forming this week's T-shaped candlestick. That being said, with all uncertainties around the banking system and the inception of Q1 earnings reporting season, it's a volatile market and there are certainly several moving components to keep an eye on.

In fact, the BoJ's yield curve control is in full fledge, meaning it is willing to print unlimited yen to keep the 10-year JGB rate at 50 basis points or lower. Japan's recent inflationary pressures have reignited hopes that newly elected governor Ueda will back away from the current ultra-loose monetary policy. The pressure to manage its expectations is mounting.