Morning Note: BOJ Holds; US-UK Trade Deal; Oil Rises on Mideast Tension

BOJ Holds Rates at 0.5%, Outlines 2026 Bond Tapering

The Bank of Japan (BOJ) kept interest rates unchanged on Tuesday, maintaining its short-term policy rate at 0.5% following a unanimous vote at the conclusion of its two-day meeting. In a move reflecting its cautious stance toward policy normalisation, the central bank also signalled a slower pace of bond purchase reductions beginning in the next fiscal year.

While the BOJ left its existing bond tapering plan, set to run through March 2026 unchanged, it introduced a new framework for fiscal 2026. Under this plan, the central bank will reduce its monthly bond purchases by 200 billion yen each quarter, aiming to bring total monthly purchases down to approximately 2 trillion yen by March 2027.

(USD/JPY Daily Chart, Source: Trading View)

From a technical analysis perspective, the USD/JPY currency pair has been in a bearish trend since January 2025, as evidenced by a series of lower highs and lower lows. Recently, it rebounded from the support zone of 142.00 – 142.60 with bullish momentum and is currently retesting the order block at 144.70 – 145.20. If it breaks above this order block, the pair may continue to rise and retest the resistance zone at 147.70 – 148.20. Conversely, if bearish pressure holds this level, the pair could potentially move lower.

U.S.–UK Lower Trade Barriers

U.S. President Donald Trump signed a deal on Monday to lower select tariffs on British imports, moving closer to a full trade agreement with the UK. Announced with Prime Minister Keir Starmer at the G7 Summit in Canada, the deal eliminates tariffs on UK aerospace goods. It confirms a 100,000-car annual quota for British automakers at a reduced 10% tariff. The agreement takes effect seven days after publication in the Federal Register.

The UK avoided looming tariffs of up to 50% on steel and aluminium, though a long-term resolution on those sectors is still pending. Britain becomes the first country to reach a tariff-reduction deal under Trump, also agreeing to lower tariffs on U.S. beef and ethanol in return.

(GBP/USD 8H Chart, Source: Trading View)

From a technical analysis perspective, the GBP/USD currency pair has been moving in a bullish trend, as indicated by a series of higher highs and higher lows. Currently, it is retesting the order block at 1.3590 – 1.3620. If it breaks above this level with strong bullish momentum, the pair may potentially move higher. Conversely, if bearish pressure holds this level, the pair could potentially decline to retest the swap zone at 1.3380 – 1.3420.

Oil Rises on Mideast Tension

Oil prices rose on Tuesday during the Asian session as markets grew increasingly anxious over escalating tensions in the Middle East. U.S. President Donald Trump’s call for a full evacuation of Tehran amid the fifth day of Israel-Iran fighting heightened fears of a broader regional conflict that could disrupt energy supplies and critical trade routes.

Concerns intensified after reports emerged that Trump had ordered the National Security Council to assemble in the Situation Room, cutting short his visit to the G7 Summit in Canada. At the same time, markets are bracing for potential new U.S. tariffs and a sharp rise in production quotas by OPEC+, both of which could significantly sway oil market dynamics in the coming weeks.

(Crude Oil Futures Daily Chart, Source: Trading View)

From a technical analysis perspective, crude oil futures have been moving in a bullish trend since April 2025, as indicated by a series of higher highs and higher lows, along with a double bottom candlestick pattern that suggests strong bullish momentum. Recently, the price broke above the swap zone of 71.50 – 72.50 but was quickly rejected and driven lower the following day. Currently, it is moving higher again and retesting the same swap zone. If it breaks above this level, the bullish trend may continue and drive the price higher potentially. Conversely, failure to break through could potentially lead the price lower to retest the order block at 66.00 – 66.60.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.