The latest interest rate decision from the Bank of Japan (BoJ) hits the newswires on July 15 at 3 a.m. GMT. The consensus among economists and several bank analysts is that the BoJ will hold rates at -0.1% and will make no policy changes as well. This could very well be the position of the BoJ for some time to come.
The BoJ will also release its outlook report. The consensus is for the bank to provide a downgrade to its GDP estimate for the country. This position is also not expected to be a market surprise, given that the bank had downgraded economic projections for all nine regions of the country in a recent report.
Market analysts do not expect the BoJ to cut rates. Previous attempts at delving deep into negative rates territory did not work out well for the banking industry, as banks suffered severe dips in profitability and were unable to lend as a result. The banking sector came out of a horrible crisis in the 1990s, and the BoJ would not want to risk a repeat of that crisis by making a foray into deep negative rates territory.
The BoJ is expected to maintain the special lending program at 110 trillion Yen, and the 10-year yield target at 0%.
Technical Outlook for USDJPY
The USDJPY presently trades within the sizeable symmetrical triangle on the weekly chart. Within the triangle, the pair continues to oscillate within a horizontal range that has 106.65 and 107.82 as the lower and upper price borders. The pair may continue to range trade if the BoJ performs according to market expectations.
To the upside, we have further resistance levels at 108.26. 108.42, 109.30, 109.70 and 110.58, in that order. These are the price levels that could be targeted sequentially by a USDJPY advance.
To the downside, we have 105.75, 104.98 and 104.56 as possible support targets, which could be targeted in sequence if the pair declines.