Global macro overview for 31/07/2018
Today in the morning one of the most important events of the week occurred, namely the decision of the Bank of Japan on monetary policy. Market expectations were about keeping interest rates, but there were speculations about changes in the quantitative easing program and target for government bonds. At 03:00 am GMT traders got to know the decision of the Bank of Japan and economic forecasts. At 06:30 am GMT a press conference will be held with the president of BOJ – Haruhiko Kuroda.
The Bank of Japan maintained its short-term interest rate at -0.1% and will soon provide additional information on monetary policy. It is known that very low rates will stay longer than initially planned. Their level can move up and down, it all depends on economic performance and inflation. When planning changes in rates, higher taxes coming in next year will be taken into account.
The bond purchase is to be more flexible, now it is expected to increase to 80 trillion yen per year. The long-term goal for bond yields is still around 0%. Purchase of ETF and REIT will depend on market conditions. The Bank has decided to take steps to reduce provisions for which negative interest rates apply.
The measures taken by the Bank of Japan are aimed at accelerating the achievement of the inflation target in order to be achieved as quickly as possible while at the same time safeguarding financial and economic stability. The institution will look at the risks associated with its monetary policy, if necessary, the necessary changes will be made.
Let’s now take a look at the USD/JPY technical picture at the H4 time frame. SO far not much has happened as the traders await the BoJ press conference. The market remains locked in a horizontal consolidation between the levels of 110.57 – 111.52 in neutral market conditions, but with a slightly positive momentum. The key technical resistance is seen at the level of 112.04 – 112.17 and the key technical support is seen at the level of 110.34-110.26.