JPY: Buy the rumour, sell the fact

EUR USD (1.2680)
Trading turned out to be rather quiet yesterday with the single currency mostly churning around the $1.27 level. Later on in NY it briefly dipped to 1.2665 before some demand lifted it off the lows again.

With the BoJ interest rate decision due today, traders seemed to have been far more interested in that yesterday. Besides, with still no major data releases having been on the agenda to steer the single currency in any direction, traders preferred to already start looking ahead to today’s and next week’s calendar. With the euro just hovering around, market participants also did not bother too much about finding a reason for its dip in the morning, but when they started buying it around the two-week low they pulled out the one reason after the other to justify their decisions. First on the list was the high oil price, followed by what looks like the market’s new favourite ‘geopolitical’ concerns, including a reported attack on an oil pipeline in Nigeria, the conflict between Israel and Hizbollah in Lebanon and continued concerns about the nuclear situation in Iran. One would have expected a much bigger move in the euro had these issues really driven the market, but it is hard to believe that all of this was behind a sluggish 30 pip move. It rather appears as if traders simply do not know what to do with the single currency at the moment or else they are convinced about their current positions.

Our target remains 1.2930/40. On a dip, the single currency should not violate our tight 1.2660 risk-limit to the bullish orientation. Below there the support situation becomes unreliable (1.2585-1.2395/05).

USD JPY (115.90)
The current objective remains a return to the upper threshold of the current consolidation (113.45 - 116.70). Once the target is achieved, we even reckon with an accelerated move up to 118.50. As the yen fell out of favour in the run up to the BoJ interest rate decision, the market immediately turned to the oil price. But it looks like it has been more of a ‘buy the rumour sell the fact’ situation as traders were already talking about the yen slide if the BoJ matches rate expectations. This morning’s 25 bp hike was in line and the central bank indicated that it will keep it at low levels for the time being and that a second hike is not on the cards for now. Nevertheless, the dollar just extended its gains after it had achieved stability yesterday and even managed a 116.10 high thus far. We expect to come across supports at 115.50 and at 115.00. The last mentioned demand point also represents the tighter limit within the positive orientation.

EUR JPY (146.90)
The single currency’s advance came within a whisker of its recent peak, which also marks the highest level on record achieved thus far. Nevertheless, today’s break beyond 146.75 should have injected the euro with the necessary vigour to continue to even loftier levels at 147.90 and thereafter ultimately to as high as 148.80, which is also the current upside potential. On a dip, we can count on buying interest at 145.70 and thereafter at 145.00 (critical).

EUR GBP (0.6890)
The cross continued edging lower yesterday and the position remains neutral for the time being. To the downside, we expect support in the 0.6850/65 zone. This also marks the point where we would turn bullish with a tight limit below. Be on the lookout for rounds of selling at 0.6930 and thereafter at 0.6980.

GBP USD (1.8415)
Despite the appointment of Andrew Sentence, who is believed to be more of a dove than a hawk, Sterling continues to move within in Wednesday’s range and remains overall in a neutral, but stable position. Overhead, we are still requiring a break beyond 1.8520, which will signal that another immediate upward attempt to 1.8575 is underway. To the downside, we are expecting to run into supports at 1.8335 and 1.8270. The latter is critical.

AUD USD (0.7485)
The Aussie slipped below our tightened 0.7500 limit, which threw us out of our immediate bullish orientation (albeit profitably). Support is thin thereafter ahead of 0.7440 and 0.7400. Resistance improved at 0.7540. We require a break of 0.7565 for the AUD to continue immediately upwards.