RBA’s and BoJ’s interest rate decisions in focus

After a rather easygoing Monday, we highlight during tomorrow’s Asian session the release of BoJ’s interest rate decision. JPY OIS imply that the bank may remain on hold at -0.10% by 56%, with the rest implying that a 10-basis points rate hike is also possible. So, there is a relative uncertainty for the rate decision itself. It should be noted that CPI rates are slowing down advising a possible delay of any rate hikes. Yet on the other hand, we note that Japanese workers seem to have secured a big pay rise, which was considered as a key prerequisite from BoJ before hiking its interest rates. Should the bank remain on hold we may see JPY slipping, while a possible hike would be unexpected by the market and could cause the JPY to strengthen asymmetrically.

USD/JPY continues to aim for the 149.55 (R1) resistance line. We tend to maintain a bullish outlook for the pair as long as the upward trendline initiated since the 11^th of March, continues to support the price action. Also the RSI indicator remains near the reading of 70, implying a strong bullish sentiment yet at the same time may imply that the pair is near overbought levels and a correction lower is also possible. Should the bulls actually maintain control over the pair’s direction, as expected, we may see USD/JPY breaking the 149.55 (R1) resistance line, with the next possible target for the bulls being the 150.85 (R2) resistance level. Should the bears take over we may see the pair breaking initially the prementioned upward trendline, in a first signal that the upward movement has been interrupted, break the 148.05 (S1) support line, thus paving the way for the 146.45 (S2) support base.    

We also note RBA’s interest rate decision tomorrow during the Asian session. The bank is widely expected to remain on hold hence market attention is expected to shift to the release of the accompanying statement. The market currently expects the bank to start cutting rates in August and be done for the year. Yet should the bank actually maintain the hawkish tone of the prior decision implying that another rate hike is possible, in contrast to market expectations, it could provide substantial support for the Aussie. Should the bank ease its hawkishness we may see AUD slipping.

AUD/USD has been moving in a sideways motion over the past 48 hours, between the 0.6620 (R1) resistance line and the 0.6515 (S1) support level. At the same time, we note that the RSI indicator remains below the reading of 50, implying the presence of bearish tendencies within the market sentiment for the pair. Hence we tend to maintain our sideways motion bias. For a clearcut bearish outlook we would require the pair to break the 0.6515 (S1) support line and take aim for the 0.6400 (S2) level, while if the bulls take over, we may see the pair breaking the 0.6620 (R1) line and aiming for the 0.6725 (R2) resistance hurdle. 

Other highlights for the day:

Today in the European session, we get Eurozone’s final HICP rate for February and Norway’s GDP rate for January and later on we get Canada’s producer prices for February, while ECB’s Buch is scheduled to speak.     

As for the rest of the week:

On Tuesday we get Germany’s ZEW indicators for March and Canada’s CPI rates for February. On Wednesday we get UK’s CPI rates for February and New Zealand’s GDP rate for Q4 and we highlight the Fed’s interest rate decision. On Thursday we highlight the release of the preliminary PMI figures for March and also note the release of Japan’s trade data for February, Australia’s employment data for the same month, the US weekly initial jobless claims figure, March’s Philly Fed Business index and New Zealand’s trade data for February and also highlight BoE’s interest rate decision. On Friday we get Japan’s CPI rates for February, UK’s CPI rates for the same month, Germany’s Ifo indicators for March and Canada’s retail sales for January.

USD/JPY H4 Chart

Support: 148.05 (S1), 146.45 (S2), 144.35 (S3)

Resistance: 149.55 (R1), 150.85 (R2), 152.00 (R3)

AUD/USD H4 Chart

Support: 0.6515 (S1), 0.6400 (S2), 0.6270 (S3)

Resistance: 0.6620 (R1), 0.6725 (R2), 0.6870 (R3)

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