Markets testing BoJ's patience

Forex News and Events

Markets testing BoJ’s patience (by Yann Quelenn)

The Bank of Japan is still in wait-and-see mode and trying to further appraise the effects of negative interest rates on the Japanese Economy. BoJ’s policy makers have refused to add more stimulus for the time being. The curse of being considered a safe haven and demand for the yen, even though declining, remain significant factors despite negative interest rates. The USDJPY has fallen below 106 for the first time since October 2014 on the back of the surprise cut by the Reserve Bank of Australia. The yen has climbed 13% against the dollar since the start of the year and there a strong support lies at 105.23, which is now clearly on target.

Japanese Finance Minister Aso appears very concerned about the strengthening of the yen and we believe that the BoJ will be obliged to intervene quickly. Current monetary policy has not had any sufficient results so far and a stronger yen will definitely not help the country back on the road to inflation. The central bank is now caught into adding more and more stimulus and the current wait-and-see stance from the Bank of Japan cannot last long. Upside pressures on the yen should continue as the Federal Reserve, despite its multiple interventions, does not seem ready to increase rates. The USDJPY will definitely monitor the 100 level.

Weak consumer confidence in Switzerland (by Peter Rosenstreich)

In a subdued start to the European session, following a volatile Asia session, data from Switzerland indicated that consumer confidence remains weak. April’s consumer sentiment survey results fell marginally to -15 in April from -14 in January versus expectations of a small improvement to -12. The drop reversed the steady improvement seen since July 2015. The trend in unemployment figures painted a rather gloomy picture despite slight increases with the index reading 70 from 68 in January. The view on job security fell to -86 from -82 well below the long-term average. Confidence in household savings over the next 12 months declined following evidence that household finances have eroded over the past year. The read remains a second tier data point; it highlights the difficult situation that Switzerland has found itself in. The deceleration in activity and growing downside risks to inflation is mainly due to the overvaluation of the CHF. Clearly, this fact has not been lost on the SNB. EURCHF has been grinding higher yet on a TWI the CHF has reversed downside trends. Deflation expectations have boosted real yields higher in Switzerland, supporting CHF buying. The SNB is in reactionary mode ahead of the UK referendum and barring an extreme event (UK votes to leave EU) and SNB implementing resulting emergency measures, CHF should further weaken providing some level of competitive relief to exports. USDCHF moved below the 0.9503 support indicating a near term challenge to 0.9476.

Today's Key Issues	Country/GMT
Apr SECO Consumer Confidence, exp -11, last -14	CHF/05:45
Mar Industrial Production MoM, exp 0,30%, last 0,10%	SEK/07:30
Mar Industrial Production NSA YoY, exp 3,40%, last 3,80%	SEK/07:30
Mar Industrial Orders MoM, last -3,10%	SEK/07:30
Mar Industrial Orders NSA YoY, last 2,00%	SEK/07:30
Mar Service Production MoM SA, exp 0,60%, last -0,50%	SEK/07:30
Mar Service Production YoY WDA, last -0,20%	SEK/07:30
Norges Bank Deputy Governors Nicolaisen, Matsen Speak	NOK/08:20
Apr Markit UK PMI Manufacturing SA, exp 51,2, last 51	GBP/08:30
Mar PPI MoM, exp 0,00%, last -0,70%	EUR/09:00
Mar PPI YoY, exp -4,30%, last -4,20%	EUR/09:00
European Commission Economic Forecasts	EUR/09:00
Apr ISM New York, last 50,4	USD/13:45
Apr Foreign Reserves, exp 415,4, last 412,4	DKK/14:00
May IBD/TIPP Economic Optimism, exp 46,5, last 46,3	USD/14:00
Apr Change in Currency Reserves, exp 1,50E+09, last -9,20E+09	DKK/14:00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Risk Today

Peter Rosenstreich

EUR/USD keeps on increasing. Hourly resistance at 1.1465 (12/04/2016 high) has been broken. Hourly support is located at 1.1217 (25/041/2016 low) and stronger support can be found at 1.1144 (24/03/2016 low). Expected to show further increase. In the longer term, the technical structure favours a bearish bias as long as resistance at 1.1746 ( holds. Key resistance is located at 1.1640 (11/11/2005 low). The current technical appreciation implies a gradual increase.

GBP/USD has fully erased resistance at 1.4668 (04/02/2016 high). Stronger resistance is given at 1.4969 (27/12/2016 high). Hourly support is given at 1.4475 (27/04/2016 high). Expected to show further consolidation before entering into another upside move. The long-term technical pattern is negative and favours a further decline towards key support at 1.3503 (23/01/2009 low), as long as prices remain below the resistance at 1.5340/64 (04/11/2015 low see also the 200 day moving average). However, the general oversold conditions and the recent pick-up in buying interest pave the way for a rebound.

USD/JPY keeps on declining. Hourly support at 106.15 (02/05/2016 low) has been broken. Hourly resistance can be found at 107.42 (29/04/2016 high), stronger resistance can be found at 111.88 (28/04/2016 high). Expected to show continued weakness. We favour a long-term bearish bias. Support at 105.23 (15/10/2014 low) is on target. A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems now less likely. Another key support can be found at 105.23 (15/10/2014 low).

USD/CHF is clearly oriented downwards on the medium-term and has broken multiple supports. Stronger support can be found at 0.9072 (14/05/2015 low). Expected to show further further weakening. In the long-term, the pair is setting highs since mid-2015. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours a long term bullish bias.

 

Resistance and Support:

EURUSD	GBPUSD	USDCHF	USDJPY
1.257	1.5242	1.0328	113.8
1.1714	1.4969	1.0093	112.68
1.1465	1.4668	0.9913	111.91
1.1385	1.4591	0.9629	107.02
1.1217	1.43	0.9476	105.23
1.1144	1.4132	0.9259	100.82
1.1058	1.4006	0.9072	96.57