CENTRAL BANKS DOMINATE THURSDAY SESSION

The Bank of Japan (BOJ) voted to stand pat on monetary policy  on Thursday, as officials continued to assess the health of the world’s third-largest economy. Meanwhile, the European Central Bank (ECB) will deliver its July policy decision later in the day, with all eyes on Mario Draghi.   

Asian markets posted gains after the BOJ voted to keep interest rates at -0.1%. The decision was widely expected by the financial markets, which have grown accustomed to the BOJ’s stance on yield-curve targeting.

The decision to keep rates in negative territory was approved by seven of the nine BOJ policymakers.

At the same time, the BOJ reduced its inflation forecast for fiscal years 2017/2018 and 2018/2019.

The yen fell against the dollar following the decision, although the USD/JPY remained in a firm downtrend near three-week lows.

The US dollar index (DXY) is in the midst of a modest recovery after plunging to 11-month lows earlier this week.

The ECB will deliver its rate verdict at 11:45 GMT. Though no change in monetary policy is expected, ECB President Mario Draghi could provide clues about the future of the central bank’s stimulus program.

Calls to put an end to quantitative easing are slowly gaining momentum after the Eurozone economy emerged stronger than expected through the first six months of the year.

In terms of economic data, the UK Office for National Statistics will report on retail sales at 08:30 GMT. In the North American session, the Federal Reserve Bank of Philadelphia will release its monthly manufacturing survey at 12:30 GMT. At the same time, the Labor Department will issue weekly jobless claims data for the period ending 14 July.

Earlier in the day, the Australian government said employment rose in June for a fourth consecutive month, with full-time jobs accounting for all of the gains.

EURUSD

All was calm for the euro ahead of Thursday’s ECB decision. The EUR/USD was trading slightly above the 1.15 handle at the start of European trade. Despite the recent 80-pip correction, the pair’s uptrend remains firmly intact. The key support level currently stands at 1.1460. On the opposite side of the spectrum, resistance is likely found at 1.1600.

USDJPY

The USDJPY has declined sharply in recent weeks amid a broad reversal for the dollar. The yen could face additional pressure now that the BOJ has lowered its CPI forecast. This suggests that a break above the 5-day moving average of 112.23 is likely for the USD/JPY. A continuation above this level would expose upside near 112.73.

AUDUSD

Upbeat jobs data did very little to boost the Australian dollar on Thursday, as the market consolidated after an impressive bull run. The AUD/USD is trading near multiyear highs after briefly trading above the 0.8000 handle on Wednesday. Prices were last down 0.2% at 0.7936.