BoJ expected to remain on hold tomorrow

Market worries deriving from Israel-Iran conflict continue to be high with the conflict threatening to evolve into a full regional war. It’s characteristic that Pakistan stated that should Iran be hit by nuclear weapons it will response in kind. Market worries at the current stage tend to revolve around oil as the global supply chain of the commodity comes under threat.

WTI’s price corrected lower in today’s Asian session, breaking the 72.20 (R1) support line, now turned to resistance. We maintain a bullish outlook for the commodity’s price as despite the correction lower, the upward movement does not seem to have been broken. Yet the fact that the RSI indicator is still above the reading of 70 and the price action is above the upper Bollinger Band, both signalling that WTI’s price is still at overbought levels, and correction lower ay be extended. For a bullish outlook we would require WTI’s price, to break the 72.20 (R1) resistance line and start aiming for the 75.65 (R2) resistance level. Should the bears take over, we WTI’s price breaking the 68.40 (S1) support line and pave the way for the 64.00 (S2) support level.

In Japan, BoJ is to deliver its interest rate decision in tomorrow’s Asian session and is widely expected to remain on hold at 0.50% and JPY OIS currently imply that the market has almost fully priced in such a scenario and the market is marginally expecting the bank to possibly deliver a rate hike near the end of the year. Hence should BoJ allow for hawkish signals to be included in its forward guidance, we may see the Yen getting some support as the market may shift towards a more hawkish anticipation for BoJ’s intentions.

USD/JPY appears to be moving in a sideways fashion remaining well within the boundaries set by the 145.50 (R1) and the 142.20 (S1) levels. We maintain our bias for the sideways motion to continue between the prementioned levels. It’s characteristic that the RSI indicator is running along the reading of 50, implying a relative indecisiveness on behalf of market participants. Should the bulls gain control over the pair’s direction we may see USD/JPY breaking the 145.50 (R1) resistance line, with the next possible target for the bulls being the 148.20 (R2) resistance level. Should the bears get in the driver’s seat, we may see USD/JPY breaking the 142.20 (S1) support line and start aiming for the 139.60 (S2) support level.

Other highlights for the day:

Today we get the number of Canada’s House starts for May and NY Fed manufacturing index for June, while ECB Board Member Cipollone speaks.

As for the rest of the week:

On Tuesday we get Germany’s ZEW indicators for June and from the US the retail sales and industrial output growth rates both being for May, while it’s the last day of the G7 meeting in Canada. On Wednesday we get Japan’s machinery orders for April and trade data for May, UK’s and the Euro Zone’s inflation metrics for May, from Sweden Riksbank’s interest rate decision, the US weekly initial jobless claims figure while BoC Governor Macklem is scheduled to speak and the Fed is to release its interest rate decision. On Thursday we get New Zealand’s GDP rate for Q1 and Australia’s employment data for May and on a monetary level, we note the interest rate decisions of Switzerland’s SNB, Norway’s Norgesbank and the UK’s BoE. On Friday on a monetary level, we note the release of the interest rate decision of China’s PBOC, BoJ Governor Kazuo Ueda’s speech and the release of the BoJ’s May meeting minutes, while as for financial data we get Japan’s CPI rates for May, UK’s retail sales for May, the US Philly Fed Business index for June, Canada’s retail sales for April, and Euro Zone’s preliminary consumer confidence for June.

WTI  Daily Chart

• Support: 68.40 (S1), 64.00 (S2), 59.85 (S3)
• Resistance: 72.20 (R1), 75.65 (R2), 79.35 (R3)

USD/JPY Daily Chart

• Support: 142.20 (S1), 139.60 (S2), 137.25 (S3)
• Resistance: 145.50 (R1), 148.20 (R2), 151.20 (R3)

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