Early on Friday, around 03:00 AM GMT, the Bank of Japan (BOJ) will provide the decision of its routine monetary policy meeting. Following the rate decision, BOJ Governor Haruhiko Kuroda will attend the press conference, around 06:00 AM GMT, to convey the logic behind the latest policy moves.
The Japanese central bank is widely expected to keep the short-term interest rate target at -0.1% while directing 10-year Japanese Government Bond (JGB) yields toward zero.
Following the extended policy support, the BOJ is expected to convey covid-led economic hardships, via shading down the GDP forecasts, per Reuters. However, the BOJ isn’t famous for accepting the fears and hence USD/JPY traders should remain cautious.
Ahead of the event, Westpac said,
The Bank of Japan announces its policy decision. No change is expected in key settings such as the 0% 10-year JGB yield target but there should be some tweaks to the growth forecasts (down in 2021, up in 2022) and some details on its green lending program.
How could it affect the USD/JPY?
USD/JPY refreshes intraday high to 109.97, up 0.13% on a day, amid US dollar strength during the early Asian session on Friday. In doing so, the Yen pair snaps a two-day downtrend and extends bounce off the weekly low.
The market sentiment struggles for a clear direction and the US Treasury yields are indecisive after the last two days’ slump. Hence, today’s BOJ meeting may offer key moves to the USD/JPY prices.
It should, however, be noted that the Olympics and slower growth in the West could allow BOJ to point a little concern over the domestic catalysts and growth figures, which in turn may help the USD/JPY to remain firmer.
Technically, a six-week-old ascending support line near 109.70, followed by the 100-DMA around 109.40, become important downside levels for the USD/JPY traders to watch during the fresh declines. Meanwhile, a downward sloping trend line from July 02 near 110.50 restricts the pair’s short-term advances.
Key Notes
USD/JPY bears testing the daily support awaiting BoJ
BOJ Preview: Yen has room to (temporarily) fall on downgraded outlook, worrying virus state
USD/JPY Forecast: Unable to regain ground above the 110.00 threshold
About BoJ Rate Decision
BoJ Interest Rate Decision is announced by the Bank of Japan. Generally, if the BoJ is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the JPY. Likewise, if the BoJ has a dovish view on the Japanese economy and keeps the ongoing interest rate, or cuts the interest rate it is negative, or bearish.
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