The Japanese yen pares some of this week's again following the recovery in Asian equities and after BoJ announced policy decisions. BoJ refrained from adding stimulus and help policies unchanged today. That is, interest rate was held near zero while the annual pace of monetary base expansion was kept at JPY 60-70T. The central bank noted in the accompanying statement that while the economy continued to have moderate recovery, there would be "some fluctuations due to the consumption tax hike." But it expected the economy to continue the recovery "as a trend". But, it also noted that business fixed investment pick-up "has become increasingly evident" and private consumption and housing investment "have remained resilient". The BoJ noted Inflation expectations "appear to be rising on the whole" but CPI excluding tax hike is "likely to be around 1.25% for some time".
Elsewhere, markets continue to digest recent moves. euro continues to recover against dollar, Sterling, Canadian and Aussie, but it's seen quite weak against the Swiss franc. Commodity currencies are also still hovering in tight range against the greenback. US equities suffered another steep decline overnight with the Dow down -166.84 pts, or -1.02%, S&P 500 down -20.05 pts, or -1.08%. NASDAQ performed the worst and was down -47.98 pts or -1.16%. However, the bearish sentiments didn't carry through to Asian session and we're seeing the forex markets struggling to find a near term direction.
On the data front, Japan current account deficit narrowed to JPY -0.04T in February. Australia NAB business confidence dropped to 4 in March. Swiss and UK data will be the main focus in European session. Swiss unemployment rate is expected to be unchanged at 3.2% in March, retail sales is expected to grow 0.9% yoy in February. UK industrial production is expected to rise 0.3% mom, 2.2% yoy in February while manufacturing production is expected to rise 0.3% mom, 3.1% yoy. Canada will release housing starts and building permits. In US, Fed officials Kocherlakota and Plosser are scheduled to speak in the US afternoon.
Canadian dollar surged this month after the strong employment report and it remains the biggest winner so far. We've mentioned that the EUR/CAD has topped out in medium term at 1.5585. Lets take a look at the GBP/CAD. Current development suggests that a short term top is at least formed at 1.8666. It's likely that it's also a medium term top as the whole rise from 1.5242 completes the third wave. Focus is now on the 55 days EMA (now at 1.8249) and 1.7957 support level. Sustained trading below the 55 days EMA and break of 1.7957 will confirm medium term topping and bring deeper correction to 38.2% retracement of 1.5242 to 1.8666 at 1.7358. But we'd expect strong support below there to contain downside to bring up trend resumption. Meanwhile, in case of recovery, risk will stay on the downside as long as 1.8666 resistance holds.