BoJ is to announce its interest rate decision tomorrow during the Asian session and is widely expected to remain on hold at -0.10%. Currently, JPY OIS imply a probability for the bank to remain on hold, of 95.75%. If the bank remains on hold we could see the market turning its attention to the accompanying statement, which could have a neutral to dovish tone due to the recent lukewarm financial data. Should that be the case we could see the JPY weakening against its major counterparts.
Due to today’s ECB interest rate decision and tomorrows BoJ interest rate decision EUR/JPY could be the pair in focus. Yesterday, EUR/JPY rose slightly nearing the 130.60 resistance line. The pairs’ price action seems to be forming a triangle where the upward trend line incepted since the 29th of May and the 130.27 level. The pair could break the 130.27 level aiming as well as the 130.60 resistance level aiming for the 131.35 resistance zone. Fundamentally the arguments for such a scenario can be located in the possibility for the ECB meeting strengthening the EUR, while on the other hand tomorrows BoJ meeting could weaken the JPY. Should the bears take over we could see the pair breaking the prementioned upward trend line and the 129.50 support line aiming for the 128.60 support level.