The market was impressed by the BOJ’s intention to do something, but after some consideration it seems the market was disappointed by the details. USD/JPY has given back all of its post-BOJ gains plus a little bit more. The EUR remains in range-bound consolidation below the increasingly pivotal 1.3080 level, sterling lost some ground on the crosses after the BOE statement and the AUD has been surprisingly well-bid despite more heavy falls in commodity markets.
There is no trend to current USD/JPY movements as can be seen on the 2-hr chart (see chart) and until such time as important levels start to prove themselves, then we should stay in range-trading mode between 77.00/79.25. One level worth watching today is 77.90, where a prior high and a 61.8% retracement sit. The BOJ Governor will be speaking this morning (no exact time given) and this might add some volatility.
EUR/JPY has a more obvious short-term bullish trend in play and its currently trading right on a 38.2% retracement level near 102.20 (see chart), if this level breaks, we could see another 100 pip drop.
EUR/USD is consolidating below 1.3080 and unless the bulls can re-take this level very soon, we will probably get a deeper retracement towards 1.2915 (see chart). Risk-reward would seem to favour selling intraday rallies with a tight-ish stop, especially if EUR/JPY can break it’s support levels. Turnover has been very heavy in the last 48 hours, concentrated firstly near 1.3080 and then around 1.3010.
Cable remains capped below a weekly high at 1.6300 and with the market’s long positions nearing levels not seen in 4 years, this pair could be ripe for a correction. EUR/GBP has been retracing in recent sessions but there is super-strong technical support at .7970 ( see chart) and buying any dips towards there looks like the obvious play.
The AUD has benefitted from heavy profit taking in GBP/AUD which started in early European trade yesterday and has driven this pair 100 pips lower (see chart) A combination of dovish BOE minutes and falling oil prices affected the GBP and the professional-market positioning in this pair was reaching extreme levels.
BHP said that the pace of China’s iron ore demand had slowed by half, the boom years being definitely over but demand remains decent. This hasn’t really affected the AUD which shows that positioning is the all important factor in the FX market.
The HSBC China manufacturing PMI will be the major event risk on the economic calendar.
Good luck today.