Online Forex Trading

ASIA SUMMARY

Tuesday’s Asia Session is the last before the Bank of Japan (BoJ) Rate Announcement. Typically, the trading environment prior to an event of major market significance is characterized by tight ranges, low volatility and light volume. Traders usually look to mitigate risk into the event, leading to a drop off in activity as a session progresses. Today, we saw a divergence from the norm. Buying in USDJPY and EURJPY around notable technical levels led to a meaningful upside move in EURJPY. The remainder of the currency pairs had lighter movement.

First and foremost, the BoJ decision is the primary topic among trading desks. The chatter remains mixed as far as predictions, with many individuals using the phrase “50/50” - - - meaning there is an even chance of either a quarter-point rate hike or an unchanged announcement, leaving rates at a meager 0.25%. The market has priced in an (approximately) 62% of a +0.25% hike. Commentary via the Bank of Japan members will be thoroughly scoured by market participants looking for any indication as to future actions with Japanese rates. Often times the public comments become more anticipated than the confirmation of a consensus result. Tomorrow, however, the indecisive market should be ready for fireworks.

As for today’s trade, a strong EURJPY led the action. The cross has added about 50 points from the turn, now sitting at 157.80. These are the highs of the session. The rally has come in two parts. Early on, USDJPY ran up to 119.75 resistance, which was successfully defended by sellers. After a brief pullback below 157.50, the climb resumed by way of EURUSD. After sitting around 1.3150 for the opening 3 hours, USDJPY selling at the highs sparked a rally into 1.3175 technical resistance. This Fibonacci retracement level was also the highs of last week. Buyers finally pushed the pair through and ran stops to a high in the 1.3187-90 area. EURUSD retreated back about 10-15 points to the current rate of 1.3175, where previous resistance proved to be support and a foundation for another run at new highs.

The London Session has a plethora of data scattered amongst the agenda from German data at 0200 EST (0700 GMT) to Euro Zone releases at 0500 EST (1000 GMT). The highlights will be the aforementioned German Producer Price Index (PPI) and UK M4 Money Supply. The expectations out of Germany are +0.1% MoM and +3.3% YoY. The UK Money Supply will hit the market at 0430 EST (0930 GMT). The consensus estimates are +0.7% MoM and +12.7% YoY.