Tuesday 19 March 2024
The RBA and BOJ were the first of a long list of CBs off the rank this week and we've seen some action in the aftermath. The RBA left rates on hold as expected but changed its rhetoric to a less hawkish, potentially dovish stance which saw AUD fall. Then it was time for the main event and the BOJ delivered as expected with an end to negative rates and YCC, discontinuing purchase of J-Reits and ETFs. In the presser BOJ Gov Ueda has said that if wage hike trend spreads to smaller firms then it's definitely a consideration for policy and they can slowly proceed with rate hikes.
As I've been pointing out/warning here recently and in a tweet yesterday this has all been factored in prior and apart from one immediate algo-led dip we've seen USDJPY rise to test 150.50 from 149.00 on the fact and amid some general USD demand again. I would still expect limited upside potential but caution still required for the moment.
The anticipation continues with the US Fed tomorrow then SNB, BOE and Norges Bank on Thursday. Data highlight today was UK CPI The Ukraine/Russia war and Middle East Israel/Hamas/Houthi/Hezbollah/Red Sea tensions still cast their own shadow. Remember to identify your preferred risk reward levels and let the algos do their thing along with the natural and speculative flows. Don't get greedy or over-analyse. These are tight ranges and will produce regular jobbing opportunities therefore while the jury remains out.
Equities had another trim in NY after yesterday's rally but remain underpinned overall on the firm belief that interest rates will be coming down at some stage soon apart from in Japan and steady again this morning. WTI has pushed higher again testing $82.50-60 this time after holding $80.80-00 amid the second-guessing on Red Sea/Gaza and global economy. Gold holding $2145 again so far in the retreat this morning after capping at $2165-70 still but remains underpinned overall on the belief that FOMC will start cutting rates in June. Eyes on FOMC tomorrow.
GBPUSD: Failure around 1.2750 again yesterday then 1.2730 but holding 1.2670 so far as the tight ranges continue. I remain poised for further re-sells when momentum fades. EURGBP: Ranging ever tightly still as the BOE/ECB debates continue and with BOE looming on Thursday.GBPJPY: Holding 189.50-60 again in the initial post BOJ dip and some expected dip support once again helping with rally to 191.20 this morning as JPY weakens further with BOJ action already factored in. Sellers will remain poised but coming second atm.
EURUSD: Support around 1.0830 being tested this morning amid the general USD demand after capping at 1.0880 this time. USDJPY: Breaking up through 150.50 as I type helped by the general USD demand. I remain a rally seller as preferred side overall but still expecting dip demand for the moment.
Traders - For more detailed analysis across a larger number of FX pairs including market order flows and options expiries email mike@mspfx.co.uk
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