Yen Rises Ahead Of Fed And BoJ Policy Decisions

(RTTNews) - The Japanese yen strengthened against other major currencies in the Asian session on Tuesday, as traders remain cautious ahead of Federal Reserve and Bank of Japan policy decisions.

The Federal Reserve is mostly expected to keep interest rates unchanged at its policy meeting on Wednesday. The U.S. President Donald Trump, who has attacked Fed Chair Powell and the central bank while constantly calling for rate cuts, is putting pressure on the meeting.

The Bank of Japan is anticipated to maintain its current policy on Thursday, while market focus will be directed towards its forward guidance to evaluate the timing of the subsequent rate increase.

A recent trade agreement between Japan and the United States has alleviated external uncertainties, which may facilitate the Bank of Japan's return to its policy normalization trajectory.

Meanwhile, investors remain cautious and seemed reluctant to make significant moves as they watch developments on the tariff front as the deadline of August 1 set by the Trump nears.

Trade deal optimism waned with investors preferring to wait for finalization of agreements though trade talks are ongoing vigorously between the U.S. and its major trading partners.

EU, Japan; Philippines, Indonesia, and U.K. have struck a best-possible deal with the US so far. High-level officials of China and the U.S. are on intense discussions in Sweden for a broader conclusive trade agreement. Canada, India, Mexico, and South Korea are parleying hectically.

In the Asian trading today, the yen rose to an 8-day high of 197.60 against the pound and reached yesterday's near a 3-week high of 171.03 against the euro, from yesterday's closing quotes of 198.20 and 171.03, respectively. If the yen extends its uptrend, it is likely to find resistance around 196.00 against the pound and 169.00 against the euro.

Against the U.S. and the Canadian dollars, the yen advanced to a 6-day high of 147.85 and 107.44 from Monday's closing quotes of 148.43 and 107.76, respectively. On the upside, 146.00 against the greenback and 106.00 against the loonie are seen as the next resistance levels for the yen.

The yen edged up to 183.79 against the Swiss franc, from yesterday's closing value of 184.21. The next possible upside target for the yen is seen around the 182.00 region.

Against the Australia and the New Zealand dollars, the yen advanced to 1-week highs of 96.31 and 88.23 from yesterday's closing quotes of 96.67 and 88.38, respectively. The yen may test resistance around 94.00 against the aussie and 87.00 against the kiwi.

Looking ahead, Eurostat publishes euro area flash GDP data for the second quarter at 5:00 am ET in the European session. Economists expect the currency bloc to remain flat after expanding 0.6 percent in the first quarter.

Also, European Commission is slated to release euro area economic sentiment survey results for July. The economic confidence index is seen at 94.5 in July, up from 94.0 in June.

In the New York session, U.S. MBA mortgage approvals data, U.S. ADP jobs data, U.S. GDP data for the second quarter, U.S. PCE prices for the second quarter, U.S. pending home sales data for June and U.S. EIA crude oil data are slated for release.

At 9:45 am ET, the Bank of Canada is set to announce interest rate decision. The central bank is widely expected to hold its policy rate steady at 2.75 percent.

Following the policy announcement, the BoC Governor Tiff Macklem will speak in a press conference.

At 2:00 pm ET, the U.S. Federal Reserve will announce its monetary policy decision. The Fed is expected to leave interest rates steady in the range of 4.25%-4.50%.

Half-an-hour later, the Federal Reserve Chair Jerome Powell will hold a news conference following the central bank's decision on interest rates.