4 October, 2013
In the October meeting, the BoJ decided to keep the policy unchanged. The annual rise in monetary base remains at Yen 60 – 70 trln, with 2014 monetary base target at Yen 270 trln. BoJ also pledged to ease until the 2% inflation is stable; a Bloomberg survey shows that 26 out of 36 analysts expect additional stimulus within the next six months. The fx markets remained muted to BoJ’s decision.
USDJPY and JPY crosses were mixed in Tokyo. USDJPY remained well supported above 97.00, after shortly hitting 96.93 in New York. The Nikkei reporting that Japan offers to drop 92% of US trade tariffs and decent AUDJPY demand were supportive. Bids are seen at 96.90, while the 200 day moving average should give support at 96.63. On the upside, Ichimoku cloud base (97.93) is the first key level. Offers are solid pre-99.00.
The Aussie was bid across the board. AUDUSD advanced to 0.9448, with eyes set on two-week high of 0.9457, if broken will open the way to 0.9529 -month high. Tuesday’s hawkish RBA statement leads some players to bet on a potential rate hike on the way. The bias is on the upside.
In Germany, Merkel’s choice of coalition is expected with great interest by the FX markets as it will be key in the decision of the financial transaction tax proposed in 11 EU countries. Traders pursue a tax exemption as to avoid costs and liquidity issues related. This said, the plan excludes the spot transactions, yet will weigh on swaps, options and forwards – roughly the two thirds of the FX market.
Carefree, EURUSD extends post-Draghi gains. The pair hit 1.3644 in New York and remained well bid above 1.3620 in Asia. With strong bullish momentum, traders are likely to remain buyers; downside moves suggest dip buying opportunities with 1.3711 – year-high in target.
In the opposite direction, the Cable retreated to 1.6160 in New York and rallied down to 1.6139 as Europe walked in. The MACD 12, 26 day indicator turned zero; further downside will signal a trend reversal in the Cable. Option bids are seen at 1.6100, yet bets are mixed below.
In the morning, traders will focus on German and Euro-Zone PPI m/m & y/y. Yesterday, the US jobless claims and continuing claims were released yet the fx markets remained muted. In the afternoon however, the important US data including factory orders, nonfarm payrolls and unemployment rate are delayed to October 11th.
The jitters in the market place raise on the unresolved US budget deadlock. As the budget deadline approaches, World leading officials urge Washington to find a resolution as concerns on US default denote a potential decline in governments treasury holdings in value...
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The week starts with good sentiment as China prints better than expected manufacturing PMI in September (51.2, versus 60.9 expected & 50.1 prev). Shanghai
The FX markets are subject to high volatility, mainly triggered by dovish comments on Fed QE and the ongoing liquidity concerns in China. Though the PBOC sees the liquidity risk controllable, the abstention to add cash in the system generated significant swings in the equity and currency markets so far...
The currency markets are mostly dominated by profit taking and speculative positioning as the investors seek direction these days. The Wall Street rally gave a short-lived boost to risk-positive currencies in New York, yet the limited enthusiasm in Asia lead to some consolidation during the overnight session...