London Forex Report: BoJ Surprise Markets With Negative Rates

London Forex Report: BoJ Surprise Markets With Negative Rates

London Forex Report: BoJ surprises markets overnight, by introducing further easing measures, adopting negative interest rates, IOER -0.1%, vote 5-4, will cut rate more if needed, to introduce 3-tier rate system, QQE left as is Y80 trln monetary base target too, economic forecasts tweaked, FY ‘16/17 GDP +1.5% (prev +1.4), core CPI +0.8% (+1.4%), CPI target to be met around H1 FY ’17, crude to rebound to $40/brl+. The BoJ move has supported risk sentiment which was on the back foot driven by downbeat data flow. With the exception of the slight upkick in UK 4Q GDP to 0.5% QOQ, driven by the services sector, data from the US and other advanced economies all disappointed. USD weakened against the USD Index falling 0.39% to 98.51 as bids continued to retreat on lower certainty on the Fed to tighten policy as quickly as markets previously thought, in addition to weak US data.

EURUSD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish

Fundamental: US Durable Goods Order tumbled 5.1 percent in December which is the biggest drop in six months. Weidmann, the head of Germany’s central bank, said Euro-zone’s inflation will be lower than expectations. However, he hinted no immediate action is needed for ECB. Today we will have Euro-zone CPI and German Retail Sales

Technical: Trading mid to upper range, a sustained breach of 1.08 bids opens 1.07 range lows. A breach of 1.0990 trend resistance opens a broader 1.1240 symmetry corrective objective.

Interbank Flows: Bids 1.08 stops below. Offers 1.0950 Stops above.
Retail Sentiment: Bullish
Trading Take-away: Play the range, buy dips to 1.07 sell rallies to 1.10

eu291

GBPUSD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish

Fundamental: UK Q4 GDP grew in line with market expectations at 0.5% QoQ, relieving some of the concerns over UK economic outlook. After the data release, GBPUSD rallied strongly through 1.43 and managed to hold on to gains. GBPUSD was up even further above 1.44 due to the weak US data before slowly crawling back to current level at 1.4350s. Attentions now turn to US Q4 GDP data as the main focus of the day.

Technical:  A breach of 1.42 opens a retest of last weeks seven year lows. Over 1.4450 eases immediate downside pressure and sets up a broader correction.

Interbank Flows: Bids 1.42 below. Offers 1.4450 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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USDJPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish

Fundamental: Finance Minister Aso states Data today doesn’t mean economy deteriorating. While New Economy Minister Ishihara stated Fundamentals unchanged, external factors affecting data.

Technical:  While 119 supports bulls target 121.66 an upside breach here opens a move to test 123.64.

Interbank Flows: Bids 117.50 stops below. Offers 119 stops above
Retail Sentiment: Bearish
Trading Take-away: Long target achieved, +150pips, sidelines

uj291

EURJPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish

Fundamental: BoJ unexpectedly Introduces Negative Interest Rate Policy EURJPY shot up, market still digesting, and Europeans to come in still to trade on this. EURJPY moved from 129.60 to 132.30 and down to 131.80 now. Central bank said it cut the deposit rate it pays on cash being parked at the BOJ by commercial banks in excess of legally required reserves, to -0.1% from the previous  0.1%. The goal was to push down borrowing costs across a broad time spectrum to stimulate inflation, the bank said.

Technical: A close over 131.65 eases bearish pressure an opens a test of 134 next.

Interbank Flows: Bids 129 stops below. Offers 132 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines

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AUDUSD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish

Fundamental:The AUD lifted against the USD yesterday and closed at 0.7084. The AUDUSD touched a seven-year low of 0.6824 in mid-January because of the slowing growth in China and diverging interest rate policies. And it started to rebound as weaker-than-expected US figures argued against US rate hikes .

Technical: While .7000 caps intraday downside expect a test .7150. Only a closing breach of .7150 eases immediate downside pressure.

Interbank Flows: Bids .7000 stops below. Offers .7150 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines

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USDCAD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish

Fundamental: CAD rallied to a three-week high against USD as higher oil and stock prices supported the risk-sensitive currency. The Loonie extended its rally since the Bank of Canada surprised markets last week by leaving its policy rate on hold at 0.50 percent. Oil prices rose for the third straight day on hopes for a deal to help clear a global supply glut also supported the Canadian dollar.

Technical: While 1.4150 caps upside reactions expect a broader corrective phase to test AB=CD corrective swing target at 1.3750 support. Only above 1.43 eases immediate downside pressure and opens a retest of 2016 highs.

Interbank Flows: Bids 1.3950 stops below. Offers 1.4150 stops above
Retail Sentiment: Bullish
Trading Take-away: Sell pullbacks to 1.43 for 1.40

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