BoJ keeps status quo, Yen reaction mixed

Market Brief

As widely expected, the BoJ kept the monetary policy unchanged at today’s meeting; the monetary base will continue increasing at the annual pace of 60-70 trillion yen. USD/JPY and JPY crosses traded mixed in Tokyo, the Nikkei stocks wrote-off 1.36%. The Japanese balance of payments improved from Yen -1,589bn to record a surplus of Yen 612.7B (slightly lower than Yen 618.1bn expected). USD/JPY traded down to 102.75, offers kept the upside limited at the daily Ichimoku cloud top (103.10.) The bias remains on the upside with option bids are placed at 102.75, stops are eyed below. EUR/JPY turns offered below 21-dma (141.68). A close below 141.80 will keep the bias on the downside according to MACD (12, 26) analysis.

In Australia, AUD gained against all of its G10 counterparts (except NZD). NAB report showed lower business confidence in March, the business conditions improved slightly. AUD/USD advanced to 0.9306 (at the time of writing). The bias is on the upside with option bets mixed at 0.9300. The key short-term resistances remain at 0.9339 (Fibonacci 61.8% on Nov’13 – Jan’14 pullback) and 0.9499/0.9500 (Fib 76.4% & psychological level). On the downside, the first line of support stands at 0.9209 (Fib 50%), then 0.9139/56 (200 & 21 dma). AUD/NZD eases from 1.0805 (broad downtrend channel top & 100 dma). A close below 50-dma (1.0733) should signal deeper downside correction.

EUR/USD slowly recovers from ECB doves. Comments from ECB’s Mersch and Nowotny stating there is no need to rush into more easing helped EUR/USD to advance to 1.3745. We see resistance at 1.3738/52 zone (50-dma & Fib 23.6% on Nov-Dec rally), more offers are eyed walking towards 21-dma (1.3809). We remain seller on rallies.

The Cable picks momentum on the upside. Yesterday’s close above 1.6590/1.6600 suggests the extension of gains as long as 21-dma holds (1.6593). EUR/GBP consolidates weakness below 50-dma (0.82820), the selling interest remains. Option barriers with today expiry are placed at 0.82850/0.83000.

Today, the economic calendar consists of Swiss February Retail Sales & March Unemployment Rate, French February Budget & Trade Balance, UK February Industrial & Manufacturing Production m/m & y/y, US March NFIB Small Business Optimism, Canadian March Housing Starts and Building Permits and US JOLTs February Job Openings.