ECB is to announce its interest rate decision and is expected to remain on hold at +0.00%. EUR OIS imply a probability for the bank to remain on hold at 95.68%. As the interest rate is not expected to change, the following press conference (13:30, GMT) could become the epicenter of the decision’s deliverables. The market may be watching out for any hints about an ending to the banks QE program. Also, the wage boost in Germany could be mentioned. The interesting part would be any comments about the effects of the upcoming US trade tariffs and the Italian elections. Please also note there could be a possible accommodation of the tendency within the ECB for tapering the QE program. In general, there could be a rather neutral to dovish tone, as cautious could be advisable at this point. EUR could weaken. EUR/USD stabilised and continued to trade in a sideways manner in the past couple of days after it broke the 1.2355 (S1) resistance line (now turned to support). We see the case for the pair to continue to trade in a sideways manner however the pair could have a bearish mood should the ECB interest rate decision and following press conference has a dovish tone. Should the bears have the upper hand, we could see the pair breaking the 1.2355 (S1) support level and aim for the 1.2230 (S2) support barrier. Should the bulls take the reins, we could see the pair breaking the 1.2495 (R1) resistance level.
- Support: 1.2355(S1), 1.2230(S2), 1.2100(S3)
- Resistance: 1.2495(R1), 1.2680(R2), 1.2885(R3)
BOJ Interest Rate decision
BoJ is to announce its interest rate decision early tomorrow and is expected to remain on hold at -0.10%. JPY OIS imply a probability for the bank to remain on hold at 96.29%. As the interest rate is not expected to change, market focus is expected to shift to the accompanying statement. Recent statements from BoJ officials about alternative ways to keep BoJ’s stimulus besides the QQE (Quantitative and Qualitative Monetary Easing) program, as well as mentioning that BoJ’s stimulus program should be data-driven and not date restricted, sparked new discussions about BoJ’s intentions. The market again may be watching out for any possible hints about the ending of the bank’s QQE program especially after recent statements by Kuroda and other BoJ officials. Any comments about the inflation rate would be interesting. Also, any comments about the US tariffs and their effect on the Japanese economy would gain on interest. Overall we see the case for a neutral to dovish tone and JPY could weaken. USD/JPY continued to trade in a sideways manner yesterday, testing the 105.55 (S1) support line. We see the case for the pair to continue to trade in a sideways manner, however with some bullish tones should BoJ’s interest rate decision and accompanying statement have a dovish tone. Should the pair come under selling interest we could see it breaking the 105.55 (S1) support line and aim for the 104.66 (S2) support level. Should it find fresh buying orders we could see it breaking the 106.95 (R1) resistance line and aim for the 108.30 (R2) resistance level.
- Support: 105.55 (S1), 104.66(S2), 103.65(S3)
- Resistance: 106.95(R1), 108.30(R2), 109.20(R3)
Today’s other economic highlights:
During the European day, we get Germany’s Industrial Orders for January which are set to decelerate and mark a decrease. In the North-American session, we get Canada’s Housing starts in February, Canada’s building permits for January and the US Initial Jobless Claims. As for speakers BoC’s Governor Poloz and Deputy Governor Lane speak.
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