USD/JPY - BOJ does a ring around to 'check rates'

Good morning,

- BOJ does a ring around to 'check rates' - BOF's Villeroy: French recovery not affected by market turbulence, market is over-reacting.

- Top/worst performers in majors versus USD on Tuesday: JPY 0.5%, EUR 0.0%, GBP 0.0%., CAD -0.3%, NZD -0.3%, AUD -0.2%.

-Intervention can take many forms There's 'jawboning' - talking about a currency to influence the direction There's actively going to the market and buying/selling to push the rate and stop a few speculators out (there are different ways of doing this) In between those two there is the simple act of the central bank (in this case the BOJ) calling up some interbank dealers at the banks and asking for a 'check' on where the price is. This is often enough to trigger buying (of USD/JPY in this case). This is what just happened according to what I've heard.

- Japan National debt was 1045T Yen at end-Dec. – Bloomberg.

- Gold shines to an 8 month high.

- Tokyo government invests public funds in forex deposits – Nikkei.

- The danger with the current period of market volatility and share sell-offs is that there is no single cause and there are a multitude of risks. Since the global financial crisis exploded in 2008, the world has lurched from crisis to crisis with periods of strong share and asset price growth in between the periodic sell-offs. In late 2008 to early 2009, many serious analysts and policymakers were worried the financial world as it was known was going to end. Unprecedented financial-sector bailouts, fiscal stimulus and interest rates — as well as a vital commitment by the G20 not to engage in protectionist trade policies — prevented catastrophe.

However, the legacy of some of those bailouts in already indebted European countries sparked the European sovereign debt crisis, which started with small players like Ireland and then Greece and Portugal, but threatened to engulf Italy and Spain.

Periodic eruptions of this crisis caused moderate global sell-offs along the way but, more recently, traders outside the countries immediately affected have begun to believe the damage of a default in Greece could be contained.

Then there have been a couple of US debt and budget crises along the way, triggering partial US Government shutdowns and the threat of a sovereign default if Congress did not raise the legislated debt ceiling. Those fears hit fever pitch in August 2011 when Standard & Poor's delivered the US Government its first sovereign credit rating downgrade, from AAA to AA+, sparking a massive share market sell-off. Then in June, July and August last year, a massive Chinese share bubble burst, sparking periodic sell-offs in markets around the world.

- Prominent oil trader Andrew J. Hall, who runs $2 billion energy and commodities hedge fund Astenbeck Capital, has gotten burned on his bullish bet on oil prices.

Astenbeck Capital fell 4% in January, according to Reuters. Last year, the fund fell more than 36%, its biggest loss ever, the report said. This year, oil has fallen to its lowest level in 12 years. On Tuesday, WTI hit $28.15 a barrel, down about 5%, and Brent hit $30.57, down about 7%. Meanwhile, the S&P GSCI Crude Oil Index has fallen more than 22% year-to-date.

"If 2015 ended badly, the start of 2016 was even worse," Hall wrote in an investor letter dated February 1, which was seen by Business Insider.

- British Manufacturing Production, a key indicator, provides analysts and traders with a snapshot of the health of the UK manufacturing sector. A reading which is higher than the market forecast is bullish for the pound. Here are all the details, and 5 possible outcomes for GBP/USD. Published on Wednesday at 9:30 GMT. Indicator Background The British Manufacturing Production indicator measures the changes in output produced by manufacturers and in the turning of inventory. Manufacturing is a critical sector of the economy, and strong readings are an indication of economic growth. The indicator has struggled, posting The markets are expecting an improvement in the December report, with an estimate of 0.0%.

Sentiments and levels

Last week’s string of weak job numbers out of the US are raising concerns about the strength of the US economy, and may result in the Fed may delaying the next rate hike. Recent British PMIs were mixed, as economic growth has been modest, while low inflation numbers continue to be a concern. So, the overall sentiment is neutral on GBP/USD towards this release.

1. Technical levels, from top to bottom: 1.4752, 1.4635, 1.4562, 1.4346, 1.4227 and 1.4135. Within expectations: -0.3% to +0.6%: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.

2. Above expectations: 0.7% to 1.0%: A strong reading can send the pair above one resistance line.

3. Well above expectations: Above 1.1%: The likelihood of a sharp expansion in the manufacturing sector is low. Such an outcome could prop up the pound, and a second resistance line might be broken as a result.

4. Below expectations: -0.7% to -0.3%: In such a scenario, GBP/USD could lose one level of support. 5. Well below expectations: Below -0.7%: A sharp contraction would likely push the pair downwards, possibly breaking a second support level.

Major news for today: GBP Manufacturing Production m/m, Crude Oil Inventories, Fed Chair Yellen Testifies.