Euro

There has again been plenty of movement on the crosses with the EUR, USD and CHF holding up and the JPY, AUD and GBP losing some ground. The JPY shorts will be tested for conviction today as we have the BOJ two-day meeting ending and this will undoubtedly cause volatility in the Yen crosses. RBNZ business confidence and the Chinese leading indicators are the other main events on the economic calendar. With only two days to go until the holiday period begins in earnest, we can also expect more positional adjustment.

There is some talk that the BOJ may refer to its inflation target, after the LDP election win and its policy of having a less-independent BOJ and a 2% inflation target. I would be extremely surprised if the BOJ says anything drastic, central bankers are generally not swayed by whatever politicians may say in the run up to an election!

EUR/USD made fresh highs above 1.3300 last night before retracing and the daily chart continues to look constructively bullish (see chart) for a move to 1.3485. Any dips back towards previous highs 1.3170/25 should meet with plenty of buying interest. EUR/JPY will again provide the volatility and momentum during this session.

a

AUD/USD has been trading in a flat-ish bullish channel for a few months now and this broad 1.04/1.06 range (see chart) is likely to continue to contain prices. We may get some downward pressure today after the break below 1.0510 and the fact that AUD/JPY longs will be nervous ahead of the BOJ meeting. There are more AUD/USD stops reported below 1.0450.

a

Cable has stalled for the third time near 1.6300 (see chart) and selling interest was heavy when it got there yesterday during European trade. Risk-reward would seem to favour the bears near this level.

a

EUR/JPY will again be the market focus around the time of the BOJ. The professional market is long of this pair but it seems that the retail market hasn’t really joined in the bull run. If the BOJ doesn’t refer to the inflation target in its after-meeting statement, then we may well see a sharp profit taking burst in the Yen crosses.

USD/JPY is consolidating near Monday’s highs at 84.40 and there is no obvious reason for the bulls to panic into profit just yet. It would not surprise me if we see 100 pip moves in either direction, depending on what BOJ says.

Good luck today.