Currency Updates:
U.S. Dollar Trading (USD) traders really earned their pips yesterday with some tremendous movement in the currency markets. In Asia the BOJ decision to target a 2% inflation target sent the USD/JPY briefly above Y90 but the market had been expecting most of what they delivered and we saw a classic buy the rumour sell the fact reaction from traders. Banking loss Rumors and heavy stock losses in the European session saw the USD at day highs but this didn’t last long with the rumors debunked and US stocks surging to fresh 2013 highs as US House of representatives look set to increase the US Debt limit. Looking ahead, no US economic data today.
The Euro (EUR) rumors and speculations swept the European markets yesterday with a 300 pip range on the EUR/JPY. Talk that large German banks were being broken up and that German Bupa President had resigned sent the EUR/USD sharply lower from 1.3350 to 1.3270 in a matter of minutes. After Buba denied the rumours we saw most Euro crosses rebound.
The Japanese Yen (JPY) USD/JPY was the most watch pair in the market yesterday with the BOJ delivering on the 2% inflation target but this proved a perfect time to book profit and we saw wild swings in most JPY pairs. A base was found near Y88.50 and the market settled down for the US session. The outlook is mixed with some believing a short term top is in place and a large correction is due whilst others believe that the BOJ has successfully created a USD/JPY uptrend
The Sterling (GBP) while the GBP generally tracked the EUR/USD lower and then back near opening levels during the US session. At the close however we saw some selling on the back of BOE Governor King’s comments that BOE QE is an important tool for helping the UK economy. GBP/JPY has found tentative support at the Y140 level but it is too early to call the correction complete. Looking ahead, January MPC minutes forecast at 9-0 hold vote. Also November Unemployment Rate forecast at 7.8% unchanged from the previously month.
Australian Dollar (AUD) the AUD/USD was very quiet compared the other majors with a small rally towards the topside resistance near 1.0580. The market is waiting for the CPI data which is important for the RBA which is a inflation fighting central bank. UPDATE Q4 Australian CPI at 2.2% vs. 2.4% y/y.
Oil & Gold (XAU) XAU/USD was strong but contained under the key $1700 psychological resistance. Recent central bank decisions to increase QE is helping Gold remain elevated. Oil had no issue trending higher tracking the US stock market rally.
