BOJ decision due out tomorrow

Our attention for today shifts towards Asia, as we take a look into what tomorrow’s Asian session has in store for us. In particular, we would like to note the release of the Japanese Core CPI rates for December which is expected to accelerate from 2.7% to 3.0%, implying an increase in inflationary pressures in the Japanese economy. Moreover, the BOJ’s interest rate decision is also set to occur during tomorrow’s Asian session, after the release of the CPI rates. As such, should the CPI rates showcase an acceleration of inflationary pressures in the Japanese economy, it may validate the market’s current expectations of a 25 basis point rate hike, with JPY OIS currently implying an 88.3% probability for such a scenario to materialize. Furthermore, an acceleration of inflationary pressures in the economy, could increase pressure on the bank to adopt an even more hawkish tone, i.e implying more rate hikes in the near future, which in turn could aid the Yen. In our view, we would not be surprised to see the bank hiking rates by 25bp and adopting a more hawkish tone in their accompanying statement. Yet, we also would not be surprised to see remarks in regards to concerns about the possibility of implementing tariffs on Japan by the new administration and the policymaker’s possible concerns as to how that may impact their rate hiking cycle. However, we must note that at the time of this report, we have not seen a clear willingness by President Trump to impose tariffs on Japan.

EUR/USD appears to be moving in a sideways fashion, after breaking above our downwards-moving trendline which was incepted on the 6^th of December 2024. We opt for a sideways bias for the pair and supporting our case is the aforementioned breaking of our downwards-moving trendline, in addition to the RSI indicator below our chart, which currently registers a figure of 50, implying a neutral market sentiment. For our sideways bias to continue we would require the pair to remain confined between the 1.0330 (S1) support level and the 1.0450 (R1) resistance line. On the flip side for a bearish outlook, we would require a clear break below the 1.0330 (S1) support line with the next possible target for the bears being the 1.0195 (S2) support level. Lastly, for a bullish outlook we would require a clear break above the 1.0450 (R1) resistance line, with the next possible target for the bulls being the 1.0595 (R2) resistance level.

WTICash appears to be moving in a downwards fashion. We opt for a bearish outlook for the commodity’s price and supporting our case is the break below our support now turned back to resistance at the 76.80 (R1) level. Moreover, the RSI indicator below our chart currently registers reading a figure close to 50, appears to have steeply moved lower from the reading of 70, which may imply that the bears may be taking control. For our bearish outlook to continue, we would require a clear break below the 71.75 (S1) support level with the next possible target for the bears being the 66.20 (S2) support level. On the flip side for a sideways bias we would require the commodity to remain confined between the 71.75 (S1) support line and the 76.80 (R1) resistance level. Lastly, for a bullish outlook, we would require a clear break above the 76.80 (R1) resistance line with the next possible target for the bulls being the 81.60 (R2) resistance level.

Other highlights for the day:

Today we note the release of the UK’s nationwide house prices rate and CBI trends-orders rate both for January, followed by the US weekly initial jobless claims figure, Canada’s retail sales rate for November, the Eurozone’s preliminary consumer confidence figure for January and the weekly EIA crude oil inventories figure. In tomorrow’s Asian session we note Australia’s preliminary manufacturing PMI figure for January, Japan’s CPI rates for December and Japan’s Jibunk manufacturing preliminary PMI figure for January. On a monetary level, we note Norway’s and Turkey’s interest rate decisions today and we highlight the BOJ’s interest rate decision during tomorrow’s Asian session.

EUR/USD Daily Chart

• Support: 1.0330 (S1), 1.0195 (S2), 1.0070 (S3)
• Resistance: 1.0450 (R1), 1.0595 (R2), 1.0720 (R3)

WTICash Daily Chart

• Support: 71.75 (S1), 66.20 (S2), 61.75 (S3)
• Resistance: 76.80 (R1), 81.60 (R2), 85.85 (R3)

If you have any general queries or comments relating to this article please send an email directly to our Research team at research_team@ironfx.com

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