BOJ hikes by 25bp

Earlier on today during the Asian session, we had the release of Japan’s CPI rates December. The CPI rates came in higher than the prior month’s readings and thus imply an acceleration of inflationary pressures in the Japanese economy. Moreover, also during the Asian session, we had the announcement of the BOJ’s interest rate decision in which the bank hiked by 25 basis points, as was widely expected by market participants and thus attention may have turned to BOJ Governor Ueda’s comments post-decision in which he stated that “There’s no change to our view of raising our policy rate and adjusting the degree of monetary support if the economy and prices move in line with our forecasts.” The comments made by the BOJ Governor may aid the JPY as it may imply that the bank could continue hiking rates during the year. Over in the US, we note the preliminary S&P manufacturing PMI figure for January which is set to be released during today’s American session. Should the figure come in as expected, it may imply an improvement from last month’s figure in a sign that the manufacturing sector of the US economy may be moving away from contraction territory and possibly moving into expansionary ‘waters’. In turn such an implication could potentially aid the USD against its counterparts. However, should the release showcase a widening contraction in the US manufacturing sector, it may weigh on the greenback.

EUR/USD appears to be moving in an upwards fashion. We opt for a bullish outlook for the pair and supporting our case is the RSI indicator below our chart which currently registers a figure near 60, implying a bullish market sentiment, in addition to the clear break above our downwards moving trendline. For our bullish outlook to continue we would require a break above the 1.0600 (R1) resistance line, with the next possible target for the bulls being the 1.0750 (R2) resistance level. On the flip side for a bearish outlook we would require a break below the 1.0450 (S1) support level, with the next possible target for the bears being the 1.0330 (S2) support line. Lastly, for a sideways bias we would require the pair to remain confined between the 1.0450 (S1) support level and the 1.0600 (R1) resistance line.

USD/JPY appears to be moving in a sideways fashion. We opt for a sideways bias for the pair and supporting our case is the RSI indicator below our chart which currently registers a figure near 50. For our sideways bias to continue we would require the pair to remain confined between the 154.65 (S1) support level and the 158.45 (R1) resistance line. On the flip side for a bearish outlook we would require a break below the 154.65 (S1) support level, with the next possible target for the bears being the 151.35 (S2) support line. Lastly, for a bullish outlook we would require a clear break above the 158.45 (R1) resistance line, with the next possible target for the bulls being the 161.90 (R2) resistance level.

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Today we note the release of Sweden’s unemployment rate for December, followed by France’s preliminary services PMI figure, Germany’s preliminary manufacturing PMI figure the Zone’s composite PMI figure and the UK’s preliminary manufacturing PMI figure all for the month of January, the UK’s distributive traders figure for January the US S&P services and manufacturing preliminary PMI figures and final University of Michigan consumer sentiment figure all for January. In Monday’s Asian session, we note China’s NBS manufacturing PMI figure for January. On a monetary level we note thee speeches by ECB President Lagarde and ECB member Cipollone.