Forex Today: Attention turns to the Bank of Japan

The key event of the day will be the Bank of Japan's monetary policy decision. During the Asian session, New Zealand will release trade data, and the Reserve Bank of Australia will publish the minutes of its latest meeting. Later in the day, Canada's consumer inflation data will be released.

Here is what you need to know on Tuesday, December 19:

On a quiet session, the US Dollar Index (DXY) closed flat around 102.60. US yields rose modestly, with the 10-year yield staying below 4%. Stocks were posting gains on Wall Street, with the Dow Jones reaching a new all-time high.

EUR/USD rose from the 20-day Simple Moving Average (SMA) and found resistance at 1.0930. The key resistance level remains at the 1.1000 barrier. On Tuesday, Eurozone will publish the final reading of the November Consumer Price Index (CPI). 

The Pound struggled on Monday; EUR/GBP rose from below 0.8600 to the 0.8650 area. GBP/USD fell for the second consecutive day, retreating from monthly highs but remaining above the 20-day SMA at 1.2610. UK inflation data is due on Wednesday.

The Bank of Japan (BoJ) will announce its decision on Tuesday. No change in the monetary policy stance is expected. However, the outcome will be closely watched as the market seeks hints about the future of the negative interest rate policy (NIRP), which is anticipated to be phased out next year. USD/JPY rose for the second day in a row but is sharply lower for December. The pair rose towards 143.00. Volatility is expected to remain elevated ahead of the BoJ decision and  considering recent price action.

Deutsche Bank on BoJ:

We expect the central bank to keep its current monetary policy stance but also see a 60% chance of some hints being made about an end to the negative interest rate policy at the January meeting. 

BoJ Preview: Forecasts from 11 major banks, little need to rush into making policy changes

USD/CAD rose modestly after a three-day sharp decline. The pair has a key support level at 1.3350. The Canadian November Consumer Price Index (CPI) is due to be released on Tuesday. The figures are expected to show annual inflation below 3%, but still above the Bank of Canada's 2% target.

AUD/USD posted its third consecutive close near 0.6700. The pair is consolidating at monthly highs, still maintaining a bullish bias. The key resistance level is at 0.6730. The Reserve Bank of Australia (RBA) will release the minutes of its latest meeting, with no major surprises expected.

NZD/USD hit a fresh multi-month high but quickly pulled back. The pair still faces resistance at 0.6250 and is hovering near 0.6200. In the short term, the bias is sideways. New Zealand will release trade data on Tuesday, along with the ANZ Business Confidence survey.

Gold rose moderately despite higher yields but failed to reclaim $2,030. XAU/USD remains above the 20-day SMA. Silver turned downwards after approaching 
$24.00 and dropped for the second day in a row, closing around $23.80.

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