The cross is close to key support at 105.50 and the central bank double-header in the next 24 hours will decide its fate. First up the US Fed will make its call on whether to “mark to market” its path for the fed funds rate or stick with the previous projection of two rate hikes this year. Expect the former, as the market effectively has a veto on Fed actions now. Leading into the meeting the US bond market is delicately poised (see chart below).
Second up the Bank of Japan releases its own monetary policy review. No change to QQE is expected as the BOJ continues to “examine the extent of the penetration” of previous easing measures. No doubt they will again emphasise their “resolve” to meet the 2% inflation target but markets will want action, not words to trigger a USDJPY rally.