Euro weakens broadly today as is trading in red against all other major currencies for the week. The common currency was weighed down by comments from ECB president Mario Draghi that the central bank won’t react to recent spike in inflation. Meanwhile, markets are starting to get cautious on political uncertainties. Recent news from France are reminding traders there are two rounds of French presidential election on April 23 and May 7, as well as elections in the Netherlands and Germany. In addition, UK is set to trigger Article 50 for Brexit by the end of March. And there are uncertainties over US president Donald Trump’s protectionist policies. Mild risk aversion is lifting the Japanese yen across the board.
BoJ Cautious on Global Developments
BoJ released the summary of opinions from the January 30-31 meeting today. The board generally saw improvements in exports, consumer spending and capital expenditure. One policy maker noted that Japan’s economic recovery has "strengthened" since the second half of 2016. And, "positive synergy effects are being produced by improvement in overseas economies, economic stimulus measures by the government, and enhanced monetary easing." However, there was a tone a caution in general over political developments globally, including US president Donald Trump’s policies and Brexit.
RBNZ Expected to Stand Pat
RBNZ rate decision is the focus in the upcoming Asian session. The central bank is widely expected to keep the OCR unchanged at 1.75% and maintain a neutral stance. As inflation is now back inside the target range, there is much less pressure for RBNZ to cut interest rate again. However, there is no clear sign of pick up in growth nor sustainability of inflation. Hence, the announcement could be a non-event. Meanwhile, RBNZ governor Grame Wheeler will step down when his term ends in September. The role is expected to be passed to a deputy before a permanent successor is appointed, in 2018. Markets are expecting RBNZ to stand pat throughout 2017.
NZD/JPY attempted to take out 83.36 resistance for the second time back in late January but failed again. The pair is trading back in range of 80.43/83.36. At this point, we’re still favoring the case that medium term corrective fall from 94.01 has completed at 68.88 already. And another rise is in favor. Sustained trading above 83.36 will pave the way to retest 94.01 high. However, break of 80.43 near support will dampen our bullish view and would turn outlook bearish. In that case, NZD/JPY should target 55 week EMA (now at 78.02) and lower.
USD/JPY Mid-Day Outlook
Daily Pivots: (S1) 111.78; (P) 112.18; (R1) 112.77; More…
With 113.44 minor resistance intact, deeper fall could still be seen in USD/JPY. But again, choppy decline from 118.65 is seen as a correction. Hence, we’d expect strong support from 38.2% retracement of 98.97 to 118.65 at 111.13 to contain downside and bring rebound. Above 113.44 minor resistance will turn bias neutral first. Break of 115.36 resistance will argue that such correction is finished and turn bias to the upside for 118.65 high.
In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. The impulsive structure of the rise from 98.97 suggests that the correction is completed and larger up trend is resuming. Decisive break of 125.85 will confirm and target 61.8% projection of 75.56 to 125.85 from 98.97 at 130.04 and then 135.20 long term resistance. Rejection from 125.85 and below will extend the consolidation with another falling leg before up trend resumption.
Economic Indicators Update
|23:50||JPY||BOJ Summary of Opinions|
|23:50||JPY||Current Account (JPY) Dec||1.67T||1.71T||1.80T|
|05:00||JPY||Eco Watchers Survey Current Jan||49.8||51.8||51.4|
|13:15||CAD||Housing Starts Jan||207K||200.0k||207.0k||206K|
|15:30||USD||Crude Oil Inventories||2.7M||6.5M|
|20:00||NZD||RBNZ Rate Decision||1.75%||1.75%|