Market Brief
In the Asian session, the big story was the announcement that the BoJ kept its massive monetary stimulus unchanged, restating that Japan’s economy is not out of the woods yet and reflation target in danger. Nikkei 225 was slightly higher by 0.71% and reached a 15-year high at 19,845.53; in China, the Shanghai Composite was up 0.79%. In Hong Kong, the Hang Seng bounced up by +2.91% to 26,011.57. USD/JPY slid 45pips on the announcement and reached 119.70 before consolidating above this level. On the short term, the pair is moving sideways between 118.33/120.47 and currently sits on its 119.74 support (Fib 38.2% on March selloff), the following one stands at 199.20 (Fib 23.6%). While on the upside one can found a resistance around 120.45 (yesterday high). Overnight, the BoJ made no change to monetary policy as was widely expected. The BoJ will conduct operations that will expand monetary policy base by 80 trillion yen annually. The BoJ retained its cautions but optimistic view on the economy yet revised lower their inflation outlook. The slowing pace of prices indicates Abe reflation target of 2% by March 2016 is in jeopardy and suggested extra stimulus will be need.
In European, session traders will be watching Switzerland’s CPI for March expected to come in at 0.2% m/m (or as deflationary pressure is diminishing slowly (-0.3% in February). Yesterday, SNB holding increased to a record level of chf522.3bn from chf509.2bn yet the rise is more likely from portfolio appreciating then intervention due to stable sight deposit. However, technical trading patterns suggest differently. EUR/CHF is treading water between 1.0445-1.0464 in a low volatility environment. USD/CHF has been consolidating gains around 0.9640 but our bias is toward further downside. However, the pair should find some support around 0.9481 (low from April 3) and resistance at the 0.9742-57 area (highs from early April).
From the Eurozone, expect Retail Sales for February at -0.2% m/m. EUR/GBP has also been pretty calm lately and is trading around 0.73 this morning. In UK, markets are still focused on the growing political risk generating from the upcoming election. As a result GBP/USD has been pretty quiet lately; a resistance can be found slightly below 0.7350 (highs from March 26 and April 6) and supports stand at 1.4761 and further at 1.4635.
Today’s key event is the release of the US Fed’s Minutes (March 17-18 meeting) during which the members removed the word “patient”. Furthermore, this will be the opportunity to have a fresh insight about the consequences of a strong dollar on the US economy as well as some clues about the outline of the future tightening cycle. Yesterday in the US session, equites wavered before the kickoff of the first quarter earnings season. The S&P 500 lost -0.21%, the Dow Jones and the NASDAQ Composite were roughly flat and retreated by -0.03% and -0.14% respectively. EUR/USD is showing a slightly positive bias and reached 1.0854 overnight. A support lies 1.0713 (low from March 31) and a resistance stands around 1.1040 (multiple highs of march and April).
Currency Tech
EURUSD
R 2: 1.1280
R 1: 1.1043
CURRENT: 1.0848
S 1: 1.0768
S 2: 1.0613
GBPUSD
R 2: 1.5166
R 1: 1.4994
CURRENT: 1.4867
S 1: 1.4635
S 2: 1.4547
USDJPY
R 2: 122.03
R 1: 120.50
CURRENT: 119.87
S 1: 118.33
S 2: 117.93
USDCHF
R 2: 0.9984
R 1: 0.9812
CURRENT: 0.9634
S 1: 0.9491
S 2: 0.9450