Decision from the Bank of Japan this morning turned out to be a non-event on the markets. It should not come as a surprise as BoJ was expected not to make any move and it has lived up to these expectations. However, there is one more central bank decision scheduled for today – FOMC decision at 7:00 pm BST (Powell presser at 7:30 pm BST). Decisions from the US central bank are rarely non-events, even if the decision is in-line with expectations.

FOMC is in a tricky spot. On one hand, inflation runs rampant. On the other hand, the labour market has not fully recovered from last year’s pandemic shock yet. Nevertheless, inflation looks to be a bigger concern as calls for tapering mount and even some Fed members claim they would like to see tapering begin this year. One factor in favour of a taper announcement today is the fact that FOMC will release a new set of macroeconomic projections. In the past, the US central bank usually announced major policy changes in meetings with projection releases.

Taking a look at USDJPY chart at D1 interval, we can see that the pair dropped to the lower limit of the recent trading range yesterday (109.30). However, an attempt of launching a rebound can be spotted today with the pair trading around 0.3% higher on the day. Potential taper announcement from Fed may provide a boost for the US dollar and help the pair distance further away from the lower limit of trading range. Key resistance to watch is the upper limit at 110.65. On the other hand, should Fed fail to boost USD and pair moves below the lower limit of the range, attention will shift to the support at 108.20, marked with the lower limit of the Overbalance structure.