No news from Fed, BOJ and RBNZ

Yesterday and overnight the 3 central banks, Fed, RBNZ and BOJ, made their monetary policy decisions for the respective Countries, but nothing has changed and interest rates remain the same.

Starting from the Fed, there was no surprise in the markets with interest rates unchanged in the 0,25-0,50% range in line with expectations, and with an unanimous vote for the non-move. The statement, however, was pretty bearish and some doubts spread between investors on the real willingness by the Fed to continue the interest rate normalization.

Despite this a rate hike in June is not totally excluded.

Very similar situation in New Zealand, with the RBNZ which left unchanged the interest rate at 2,25% against market expectations, but the spokesman statement suggest that a possible easing is on the book for June in order to bring inflation in line with the Banks comfortable level:

“further policy easing may be required to ensure that future average inflation settles near the middle of the target range”

Other elements in favor of this short term easing would be, following the RBNZ, the deteriorate economic expectations, mostly for the Chinese market, but also for all the others financial markets globally; an inflation level still too low, capped by lower oil prices and other lower import prices; and the NZD exchange rate which continue to be too high, considering the Country’s export prices pretty low.

Last one is Japan, with the BOJ that decided not to change the -0,10% interest rate level, disappointing the market operators, who were waiting for a strong intervention from the Central Bank. Despite spokesman declared the possibility of an intervention in case of necessity on the 3 fundamental variables (quantity, quality and interest rate), the market reacted strongly bringing up Yen price.

On one hand EUR/USD, after a small spike this morning, at the time of writing is trading almost flat +0,17%, on the other hand NZD/USD and USD/JPY reacted strongly, trading respectively at +1,47 (at 0,6934) and -2,21% (at the moment at 108,9825) and hinting that the Central Banks moves took by surprise investors, which thought to see a different scenario.

Passed this storm and after the market will have assimilated the non-moves we will see the real price action of the crosses for today’s training session which probably, won’t reverse the actual trend.

 

 

 

Central Banks days: Fed and BOJ in the spotlight

Today’s and tomorrow trading session will be very interesting and difficult for the investors. The reason? Volatility will be very high in correspondence to the two monetary policy decision by both Fed (today) during the FOMC and BOJ (tomorrow).

You can easily check this sentiment on the USD/JPY chart, which during yesterday’s session have moved in a very tight 80 pips range, first moving down and after that going to the up closing not far from the opening level.

The common opinion between traders suggest not to put heavy bets close to the risky events, because every word will be weighted by the investors and, despite the decision could be already priced by the market, the statement’s tone could cause sudden spikes or drops. The current calm on the chart is just the warning for a possible high volatility during the next hours.

USD:JPY 27 apr

The current trading session for the USD/JPY pair shouldn’t be different: at the moment the cross is trading at 111,1560 down 0,14% and from the actual level a brake under the 111,00 level could bring the pair to the first support at 110,60. A possible brake of this level could bring the pair at the 38,2% Fibonacci level between 107,84 and 111,86 at 110,30. This specific support could act as a nice level for a rebound and this is not excluded.

On the opposite side the cross could find the first resistance at 111,30 after which the gain could reach the 112,00 level (a psychological one more than technical).

 

 

 

 

The small rise of the Yen, markets waiting for the rate decision

A series of small gains, is characterizing the opening of the London session for the Yen, which currently is trading higher against the main G10 currencies.

Gains due in particular to the Asian equity sell-off which is now bringing the Nikkei 225 to the 17.439 level, with a negative performance of 0,76%, and by a stall in the purchase on the Oil market.

The EUR/JPY pair meanwhile is moving down 0,23% at almost 125,00 and seems to extend the yesterday’s flat movement. The Euro currency make it difficult to regain ground while the bears continue to influence the general risk-sentiment of the market.

Moreover the EUR/USD seem to influence the negative trend of the cross, having difficult to regain ground and making a negative performance too, with the USD again to the front foot.

EUR:JPY 26apr

Even the USD/JPY cross is going down, making a -0,19% performance at 110,00 after the Japanese equity pullback.

At the time of writing the equity market seem to be the principal market mover, while the US currency could be affected by the release of the Durable Goods data, expected for today’s NY session. A possible rebound to the 1,9% for the March data is expected against a negative figure of 3,0% for the last month.

USD:JPY 26apr

Regarding this week, however, the 2 cross are seen with a neutral view, looking for the monetary policy decision for both BOJ and Fed. Following a Bloomerg survey, the possibility of a BOJ rate cut within July is 93% and it is not excluded that even the Thursday meeting could hold some surprises. Governor Kuroda in the meantime, during a parliament speech, stated that the impact of the negative rates on banks is extremely limited, indicating a willingness to cut rates on the short therm.

Bank-of-Japan-negative-interest-rates

Technical levels for the EUR/USD pair are seen at 125,50 to the up, while on the opposite front the first significant support is seen at 124,61 (22 March low), which broken could bring the pair to the second one at 124,00.

On the other hand, considering the USD/JPY cross, the first resistance is seen at 111,88 while the first important support is at 110,81 followed by 110,09.

 

 

BOJ: Yen drops following negative rates discussion

Surprising move from the BOJ which, following a Bloomberg news, during the night have discussed the possibility to introduce negative rates on loans (after having already introduced them for the excess reserves at the beginning of the year) and the market already suppose a Bank Lending Facility change, today at 0%.

The Japanese currency immediately drops against the main G10 currencies:

EUR/JPY is trading 124,62 at the moment making a positive performance of 0,86% after an almost 100pips spike and further exacerbated by the recent buying EUR/USD pressure.

EUR:JPY 22 apr

Almost the same situation for the USD/JPY cross which is trading 110,31 at the time of writing making a +0,77% performance, after a spike started from 109,35 at the same time of the Bloomberg news. The heavy selling of the Yen is bringing the pair to the 12-days low and the price action seem not to be exhausted yet.

USD:JPY 22apr

The Yen movement and the high volatility which characterizes the market are supported not just from the BOJ news, but also from the expectations on the monetary policy decisions both by BOJ and Fed scheduled for next weeks.

From a technical point of view, the next significant resistance for the USD/JPY pair is positioned at 111,00 (round number).

On the other hand, if we take a look at the EUR/JPY cross, we can find the next resistance level at 125,00 followed by a round psychological level at 125,55 in which we could se a correction.

GBP: unconvincing gains ahead of Brexit pools

A slightly positive GBP have opened of the London session against his principal peers, EUR and USD.

While Cable is moving up 0,10% at 1,4346, the EUR/GBP cross is losing 0,10% trading at 0,7874. Both positive performance for the Sterling which however are not convincing the investors who are still not buying the English currency.

The GBP/USD pair, after having touched the daily low at 1,4320, seems to recover despite all the pressures coming from Europe and the loss of the profit taking resulting from the persistent risk-off sentiment on the market, after the strong regain of the oil price overnight.

The market seems to weigh the positive US housing data, another factor that limits the upper movement of the cross.

Cable 21 Aprile

Moreover Brexit fears, even mitigated during the last few days, continue to scare investors and, despite “Bremain” forecasts, the Sterling finds hard to unwind the Brexit risk-premium, until the voting won’t be made.

The EUR/GBP seems to be trapped in a downside channel, which suggest even more downside movements during next weeks.

EUR:GBP 21 Apr

An hypothetical downside move of the Sterling during today’s trading session, however, remains capped from the slightly lower expectations for the March Retail Sales: the YoY and MoM February result have been respectively 4,1% and -0,2% and forecasts for the March ones show a slight decrease to 3,8% and -0,3%.

Looking at the Cable’s chart it’s easy to find interesting levels on which take a position: 1,4375 the first significant resistance which could be tested, while 1,4300 remains the main support level (round number) below which the pair could go to 1,4250, nice level for a take profit.

Market remains of the idea that hardly the Cable will brake the 1,45 level, at least until the exit pools for the UE referendum will be done.

Regarding the EUR/GBP pair, a braking of the upper level of the channel would be mean a trend reversal, which could bring the cross to regain the 0,7890 level (daily high).

Sterling UP while Brexit possibility is going DOWN

A renewed buying pressure for the GBP is spreading between investors pushing EUR/GBP to the downside, while on the opposite side the GBP/USD continues to go up.

It is by now consolidated the fall of the EUR/GBP under the o.8000 level with the continuous selling pressures of the Euro currency which at the moment are pushing the cross to trade at 0,7913 making a negative performance of 0,09%.

EUR:GBP 19apr

Opposite movement for the Cable which is trading positive at the moment at 1,4310 (+0,22%) after having touched the Asian session high at 1,4316. The Sterling in extending his recover against the Greenback for the 3rd consecutive session starting from the 1,4100 low on the back of the risk-on sentiment prevailing the market.

Cable 19apr

Possible reasons for the Sterling price actions are related to the speculations of the Brexit pool: following the Telegraph’s ORB pool the “remain” side will win while, following a treasury analysis on the UE referendum, the Brexit possibility would cost more than £ 4.300/year for every household.

david-sapsted-2016-mar-01-09-8711-business-group-chief-quits-after-brexit-call_7915_t12

Meanwhile the GBP Economic Calendar is pretty empty, the most relevant event will be the BOE governor Carney speech while looking at other countries, relevant events for the Sterling crosses would be the US housing data and the German / Euro-Zone ZEW surveys.

Looking at the charts of the two crosses we can see some interesting levels:

the EUR/GBP cross seen to the downside could find the next significant support at 0,7853 after which the pair could have no reasons not to go to the 29 March low at 0,7825.

Regarding the Cable it is not excluded a test of the 1,4391 resistance which could be a good level to short the pair waiting for a correction.

 

NZD: positive CPI is not enough, the oil price action continue to weigh

new-zealand-dollar-currency-forecast-5

A Q1 CPI slightly up 0,4% against previous 0,1% is the data released during the night which is influencing the actual NZD price action and show a soft positive situation for New Zealand bringing confidence between investors. Even the RBNZ have positively seen these data keeping the market to consider the OCR cut from 2% to 1,75% during the Aprile/June period from a 50% to 28% today.

However the New Zealand currency’s price action doesn’t seem to reflect the euphoria of the market: in the opening of the London session the NZD/USD moved to the downside and is currently suffering from the Oil volatility which is pushing the Kiwi to the red. Even if the gap is almost healed, the cross is currently trading at 0,6912, down 0,15% and it seems to have difficulties to regain the positive side of the chart after the Oil sell-off which is cutting down the market risk sentiment.

NZD:USD 18apr

WTI and Brent are trading at the time of writing respectively at $38,55bbl and $41,17bbl (-4,74% and -3,92%) after having experienced an heavy downside gap at the opening session related to the missing agreement by the oil producers for the freezing of the production in Doha this Sunday.

It is interesting to see the AUD/NZD cross which is currently trading at 1,1088 down 0,65%: the Oil weaknesses is weighing more on the Australian currency which, after a decent opening gap, have done a 100pip more spike before trading at these levels.

AUD:NZD 18apr

The economic calendar for the New Zealand currency is full of events: tomorrow we will have the GDT Dairy Auction and Thursday it will be the turn for the consumer confidence and the credit card spending.

Analyzing the possible movements of the NZD during the next months i can estimate a possible price action:

NZD/USD: the cross is seen to the downside during the next months, in relation to a combination of lower OCR and better US economic data. Last weeks have seen a US Dollar under pressure after the skepticism of the Fed tightening process by the investors which are now pushing the Dollar to the downside. This sentiment is going to fade away during the next months, bringing up the USD.

Next intraday levels would be 0,6950 to the upper side, while the next significant support would be positioned at 0,6854.

AUD/NZD: the medium-term prediction for this cross is corroborated by the RBNZ willingness to cut the OCR while this move is currently excluded by the RBA. On the other side the Australian M&A activity is going to push up the AUD and in that case the cross would move up. We’ve to consider that this particular cross remains strongly correlated to the Black Gold price action and the Chinese economy performance.

 

 

AUD: good labour data aren’t enough

Overnight the Australian labour data have been better than expected, but the Australian Dollar after an immediate reaction seems not to have changed his price action.

The labour market data seems to be way better, signaling better economic conditions for the country: decreasing unemployment rate at 5,7% (against previous 5,8% and 5,9% expected) and positive change in employment at 26,1k (previous -0,7k and 17k expected). That’s more: flat participation rate and growing inflations expectations. With those numbers the country is proving that his labour market and his economic conditions in general are growing driving out any doubt of the market.

In this situation the AUD is having a mixed behavior and, as sometimes in this case happen, spikes and drops are bringing volatility on the market.

Specifically the AUD/USD pair after the initial drop before the data disclosure, had an instinctive 20pip spike followed by a 40pip drop. At the moment the pair is trading flat at 0,7653 demonstrating that the investors, after having digest the positive news regarding the labour market, are now still weighing the possibility from the RBA to cut rates in the next months. Moreover the exit of the US PMI index this afternoon is making pressure at the pair.

AUD:USD 14apr

Slightly different situation for the AUD/NZD pair which, following Australian data, has spike for more than 100pip, braking the 1,11 barrier and trading at the moment at 1,1184 (+1,13%) continuing his climb.

Favoring this move is the heavy drop of the NZD/USD which at the moment is trading down to 1,28% after the bad price action of the Oil which is making heavy pressure to the Kiwi.

AUD:NZD 14apr

Interesting is the technical analysis of these two crosses:

regarding the AUD/USD the next resistance is positioned at 0,7700 (psychological level) while on the opposite side the immediate support for a bounce should be seen at 0,7609.

Considering the AUD/NZD pair, the next resistance which should be broken is at 1,1200 (round number).

 

JPY to the downside: more easing to come

A downside move is pushing the Japanese Yen against the major G10 currencies at the moment, following rumors regarding a possible BOJ rate cut to come in order to continue his easing process.

During the night BOJ board member Yutaka Harada’s statement have frightened the markets, causing the sell of the Japanese currency. Following spokesman’s words, the BOJ have the possibility to act again in order to cut even more the interest rate in case the economic conditions would require it and in case the economic risks would increase. His analysis, moreover, points out that currently it is difficult to determine if the Yen level is concordant with the economic fundamentals, bringing to light the uncertainty regarding the Yen capability to maintain the actual price level

At the time of writing EUR/YPY is trading slightly higher at 123,71 (+0,10%), extending even in the London session the Yen sell off of the Asian session. This is the second consecutive higher session for the pair and it won’t be the last, before the BOJ meeting of next week, which is bringing uncertainty on the market. Another downside element for the Yen regards the unexpected  Chinese trade balance data which have increased the market risk appetite, bringing more selling pressures on the safe-haven currencies, like Yen.

EURJPY 13apr

From a technical point of view, looking at the EUR/JPY chart, it is easy to see the next significant resistance at 124,38 (38,2% Fibonacci level between 121,98 and 128,26) after which the pair would have the possibility to gain the 125,66 level. On the opposite side, in case the cross would invert his trend, the first supportive level will be 122,52.

 

OIL and CAD up after yesterday’s FOMC

After yesterday’s statements from the Fed policymakers at the FOMC, in which they expressed strong doubts on the Global Economy situation and on the inflation level, the speakers disagree on the timing for the next rate hike: some of them expressed their preference for March, while others indicated April as better.

On the back of these statements, the market started to sold the greenback against his current peers, pushing it down.

The general risk-on tone on the market, moreover, have positively influenced on the Oil price which, pushed by the unexpected drop in the inventory, at the moment is traded positively (WTI at $38,11bbl and Brent a $40,15bbl respectively +0,36% and +0,31%) boosting the downside of the USD.

The currency certainly benefitting from both the movements is the CAD, which after the USD drop and the Oil spike, at the moment is making the second consecutive positive session, bringing the USD/CAD to trade at 1,0321 with a negative performance of 0,52%.

Moreover, following DB, the count of the short contract done by the traders on the CAD during last week is decreased of almost 9k, bringing to light a better picture for the Canadian currency.

From a technical point of view, looking at the USD/CAD chart, we can see the first support at the 1,2858 level (2016 low on the 31st of march). A braking of this level could bring the gross to test the second significant support at 1,2827. On the opposite side, even if unlikely to happen, the first resistance could be positioned at 1,3118 (20-day SMA).

USDCAD 7apr

All the market will be looking at an important event for the Canadian country this afternoon: the February building permits expected to be 4% after the negative data of 9,8% of Genuary.

Even if it will be indicative for the health of the country’s economy, the movements of the currency will be related to the USD and Oil prices, which, for the first one, should be relevant waiting for tonight’s Yellen speech.