Yen Bought Back As BOJ Disappoints

in another hurricane affected day of trading the Dollar finished lower against most pairs with risk appetite picking up overnight after European stock gains. Normal trading is expected today in the US session as the clean up begins. Looking ahead, October Chicago PMI forecast at 51 vs. 49.7 previously. Also Weekly Crude Oil Inventories forecast at 1.6m vs. 5.9m previously.

The Euro (EUR) strong support at the bottom of the recent range at 1.2880 held for a second test on Tuesday and we saw a large bounce with bulls taking back control. Better than expected Spanish GDP at -0.3% vs. -0.4% helped to underpin the rally. Also supporting was a strong Spanish debt auction which implies confidence still Europe will survive the crisis. The Sterling (GBP) the downside was tested in Asia but we got a good recovery in the US session back to 1.6080. BOE Member Haldane state that UK banks are beginning to turn a new leaf. Looking ahead, October Flash PMI forecast at 2.5 vs. 2.6 previously. September Unemployment Rate forecast at 11.5% vs. 11.4% previously.

The Japanese Yen (JPY) the main action for the day was on the USD/JPY which tested Y80 before the BOJ meeting announcement. The market sold the USD/JPY immediately after the announcement of 11trn expansion of their asset purchase program which many expecting more from the BOJ. Most of the losses on the crosses were erased in the European session as sentiment improved. Australian Dollar (AUD) was able to ignore most of the EUR/USD selling in Asia with EUR/AUD providing an outlet for the Euro weakness. Resistance at 1.0380 was eventually tested in the Asia session with major resistance seen between 1.0380-1.0410. Looking ahead, September Building Permits forecast at 1% vs. 6.4% previously.

Oil & Gold (XAU) Gold is creeping higher from the $1700 level but has not been able to break above $1718 resistance. OIL/USD was stable creeping higher with the improvement in risk appetite overnight.

Pairs to watch

USD/JPY rally over or just delay?

EUR/USD support found to retest 1.3000 now?

TECHNICAL COMMENTARY