BOJ: MNI BoJ Review - July 2023
Executive Summary
- On Friday, the BoJ announced its decision to maintain the short-term policy interest rate at 0.1% and allow the 10-year JGB target to fluctuate within around plus and minus 50bp from the target level of zero per cent. However, the market was taken by surprise as the BoJ made a notable change to its Yield Curve Control (YCC) framework, providing greater flexibility. Now, the 10-year yield will not be rigidly confined to the 50bp band and can exceed up to 1%.
- During the BoJ's post-meeting press conference, Governor Ueda refrained from hinting at future decisions, including policy bias, and emphasised that the move was not a step towards policy normalisation.
- Prior to the meeting, Governor Ueda had managed expectations by indicating that no policy changes were likely. This approach is not surprising, considering his previous stance that any adjustments to the YCC framework should come as a surprise. However, this strategy carries the risk of the markets questioning his future guidance on inflation and policy.
- In the quarterly Outlook Report, the BoJ significantly raised its inflation outlook (core CPI) for FY23 to 2.5%, up from 1.8% in the April report. Despite this, the central bank maintained its easing bias and emphasised its readiness to implement additional easing measures if needed.
- Full review here: BoJ Review - July 2023
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USDCAD TECHS: Corrective Cycle Still In Play
- RES 4: 1.3427 High Jun 7
- RES 3: 1.3382 50-day EMA
- RES 2: 1.3355 High Jun 15
- RES 1: 1.3280/86 20-day EMA / High Jun 29
- PRICE: 1.3235 @ 16:15 BST Jun 30
- SUP 1: 1.3190/3117 Low Jun 28 / 27 and key support
- SUP 2: 1.3084 1.618 proj of the Apr 28 - May 8 - May 26 price swing
- SUP 3: 1.2992 50.0% retracement of the Jun - Oct 2022 bull rally
- SUP 4: 1.2954 Low Sep 13 2022
Demand for buying on dips helped USDCAD recover from an intraday pullback on Friday, prompting the pair to hold the week’s gains. Nonetheless, the latest recovery is considered corrective and the trend outlook remains bearish. Moving average studies are in a bear-mode position, highlighting a downtrend. A resumption of weakness would open 1.2992, a Fibonacci retracement. On the upside, firm resistance is seen at 1.3280, the 20-day EMA. Clearance of this level would expose the 50-day EMA, at 1.3382.
AUDUSD TECHS: Bearish Extension
- RES 4: 0.6921 High Feb 20
- RES 3: 0.6857/6900 High Jun 20 / 16 and key resistance
- RES 2: 0.6701/6806 20-day EMA / High Jun 27
- RES 1: 0.6665 Low Jun 30
- PRICE: 0.6659 @ 15:53 BST Jun 30
- SUP 1: 0.6596 Low June 29
- SUP 2: 0.6579 Low Jun 5
- SUP 3: 0.6562 76.4% retracement of the May 31 - Jun 16 rally
- SUP 4: 0.6485 Low Jun 1
Despite a modest bounce Friday, the overarching outlook for AUDUSD remains soft following recent weakness and the extension of the reversal that started Jun 16. The downleg has resulted in a break of the 20- and 50-day EMAs, suggesting scope for a deeper retracement. 0.6627, 61.8% of the May 31 - Jun 16 rally, has also been cleared and this opens 0.6562 next, the 76.4% retracement point. Key resistance is 0.6900, the Jun 16 high. Initial firm resistance is at 0.6701, the 20-day EMA.
EURJPY TECHS: Maintains A Bullish Tone
- RES 4: 159.92 2.236 proj of the May 11 - 29 - 31 price swing
- RES 3: 159.09 2.0% 10-dma envelope
- RES 2: 158.72 2.00 proj of the May 11 - 29 - 31 price swing
- RES 1: 158.00 High Jun 28
- PRICE: 157.77 @ 16:13 BST Jun 30
- SUP 1: 155.06/154.05 Low Jun 23 / 20 and key short-term support
- SUP 2: 154.26 20-day EMA
- SUP 3: 153.09 Low Jun 16
- SUP 4: 151.61 Low Jun 15
EURJPY maintains a bullish tone and the cross is holding on to its latest gains. This week’s price action reinforces a bullish theme and maintains the price sequence of higher highs and higher lows. Moving average studies are in a bull mode position too, highlighting positive market sentiment. The focus is on 158.72, a Fibonacci projection. Initial key support is at 155.06, the Jun 23 low.
