BoJ interest rate decision

BoJ will announce its interest rate decision during tomorrow’s Asian morning and is widely expected to remain on hold at -0.10%.

Currently JPY OIS imply a probability for the bank to remain on hold of 98.37%.

A lot of ink has been spilled on whether there is going to be a more hawkish “tweak” regarding the bank’s QQE program in the accompanying statement, however recent financial releases seem to disagree with such a scenario.

Also, analysts mention the possibility for the bank to lower its expectations regarding inflation as it currently seems to be drifting further away from the bank’s target.

Should there be a neutral to dovish comment, we could see the JPY weakening.

USD/JPY continued its sideways movement on Friday and today’s Asian morning between the 110.75 (S1) support line and the 111.30 (R1) resistance line.

The pair could continue to have a sideways movement however some bearish tendencies could follow, should headlines about a hawkish tweak in BoJ’s accompanying statement affect the market.

Should the pair come under selling interest we could see the pair breaking the 110.75 (S1) support line while should it find extensive buying orders along its path we could see it breaking the 111.30 (R1) resistance line.

US Dollar awaiting for direction

The USD remained in a rather stable situation in the past few days, however had some weakening tendencies against some of its major counterparts.

USD losses seem to be currently limited by a rising 2 year Treasury yield, implying strong market anticipations for future rate hikes.

Analysts noted, that even the strong US GDP data was not able to lift the Dollar on Friday, as the market may be more interested in data including the July tariff implementation.

Overall, should there be no surprise in the fundamentals we could see the direction of the USD dependent of the central banks interest rate decisions this week (especially FOMC).

EUR/USD broke the 1.1640 (S1) support line on Friday in anticipation of the US GDP growth rate, however corrected later on.

We could see the pair continue to have a sideways movement today, although some bullish tendencies could exist as financial releases today may favor the EUR side.

Should the bulls command the pair’s direction, we could see the pair aiming if not breaking the 1.1745 (R1) resistance line.

On the other hand, should the bears be in the driver’s seat, we could see the pair breaking the 1.1640 (S1) support line and aim for the 1.1580 (S2) support hurdle.

In today’s other economic highlights:

In the European session we get Germany’s preliminary HICP rate for July, while in the American session we get the US Pending Home Sales growth rate for June.

As for the rest of the week:

On Tuesday, France’s and Eurozone’s CPI preliminary rates for July are due out.

On Wednesday, we get the US ISM Mfg PMI for July and FOMC’s interest rate decision.

On Thursday, the much awaited BoE interest rate decision will be released and could significantly move the market.

On Friday, market focus may shift to the US employment report with its NFP figure and to a lesser extent the UK Services PMI, both for July.