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BoJ Governor Haruhiko Kuroda said in the post meeting press conference, "Overseas market volatility has heightened from around spring ... While we have kept the 10-year bond yield from exceeding the 0.25% cap, this has caused some distortions in the shape of the yield curve. We, therefore, decided that now was the appropriate timing to correct such distortions and enhance market functions." That's led to the decision today to raise the cap from 0.25% to 0.50%.

"Consumer inflation has hit 3.6% mainly through rising import costs from a weak yen. Furthermore, inflation expectations are heightening. This is pushing down real interest rates and enhancing the stimulus effect on the economy. As such, while we've (widened the band) to correct distortions in the yield curve, the move won't diminish the effect of YCC," he added.

But Kuroda also indicated, "I don't think we need to review YCC or quantitative easing for the time being." "It's premature to debate specifics on changing the monetary policy framework or an exit from easy policy. When achievement of our target comes into sight, the BOJ's policy board will hold discussions on an exit strategy and offer communication to markets," he said.

Market movers today

Today, the German Producer Prices will be released for November. Consensus is looking for a second consecutive m/m decline, which would naturally signal good news for the German economy together with the yesterday's more upbeat Ifo. Flash Consumer Confidence will be released for the broader euro area as well.

US housing starts will also be released for November, consensus is looking for a further decline in line with NAHB indicator released yesterday. That being said, the modest uptick in NAHB 6M expectations combined with US mortgage rates now below November highs could send an early positive signal for the US housing market as well.

On the central bank front, the National Bank of Hungary is expected to maintain policy rates unchanged. ECB's Kazimir will also be on the wires today.

The 60 second overview

Japan: Bank of Japan surprised market by changing its yield curve control policy. It widened the upper part of the fluctuation band to 0.50%, while keeping the target of 0.00%. The move led to a jump in 10Y Japanese government bond yield above 0.40% and a drop in USD/JPY to around 133.

EU: EU finally settled on a natural gas price cap, the so-called gas market correction mechanism, which put a EUR180/Mwh ceiling over European natural gas price from 15 February and one year forward. The spot natural gas price benchmark was EUR107/Mwh yesterday.

Iran: UN nuclear officials were reported to have visited Iran Sunday for talks over future corporation and Iran reports it plans to meet EU officials in Jordan soon. It may bring talks over an Iran nuclear deal back to life, although it is likely up to the US whether it will end with a deal that will ease sanctions on Iran.

FI: Italian yields came under pressure yesterday extending the underperformance following the ECB meeting last week, in what was generally a rates up trading session. ECB's VP de Guindos confirmed the hawkish tones from Lagarde last week, which added some 4-5bp to the peak policy rate of 3.24% (€STR). Curves bear steepened with 30y Germany adding 8bp yesterday.

FX: It has been an unusually quiet start to the week in FX markets with Majors spanning moves of little more than +/- 0.5%. EUR/USD remains close to 1.06 while EUR/SEK and EUR/NOK are trading around 11.00 and 10.50, respectively.

Credit: Credit markets traded mostly sideways yesterday, seeking to come to terms with the recent hawkish rhetoric from the ECB and squaring this with the recent widenings in spread. Both primary and secondary activity is quite low as many investors are closing down for the year. Itraxx main widened 1.6bp to 97bp while Xover tightened 1bp to 505.6bæ

Daily Pivots: (S1) 136.05; (P) 136.61; (R1) 137.46; More...

USD/JPY's decline from 151.93 resumed by breaking through 133.61 support, and intraday bias is back on the downside. Immediate focus is now on 55 week EMA (now at 131.76). Decisive break there will pave the way to next fibonacci level at 121.43. For now, risk will stay on the downside as long as 138.16 resistance holds, in case of recovery.

In the bigger picture, price actions from 151.93 medium term could be just a corrective pattern to up trend from 102.58 (2021 low). Strong support from 38.2% retracement of 102.58 to 151.93 at 133.07 and 55 week EMA (now at 131.76) will set the range for such corrective pattern. However, sustained break of 55 week EMA will pave the way to 61.8% retracement at 121.43.

Daily Pivots: (S1) 0.9265; (P) 0.9307; (R1) 0.9328; More...

Intraday bias in USD/CHF remains neutral at this point. On the downside, break of 0.9214 will resume the fall and target 61.8% projection of 1.0146 to 0.9355 from 0.9545 at 0.9056. However, break of 0.9378 resistance will indicate short term bottoming and turn bias back to the upside for 0.9545 resistance instead.

In the bigger picture, rise from 0.8756 (2021 low) has completed at 1.0146, well ahead of 1.0342 long term resistance (2016 high). Based on current downside momentum, fall from 1.0146 might be a medium term down trend itself. Sustained break of 61.8% retracement of 0.8756 to 1.0146 at 0.9287 will pave the way to 0.8756. In any case, risk will stay on the downside as long as 0.9545 resistance holds.

Daily Pivots: (S1) 1.2097; (P) 1.2170; (R1) 1.2218; More...

Intraday bias in GBP/USD stays mildly on the downside for the moment. Fall from 1.2445 short term top is in progress for 55 day EMA (now at 1.1874). Firm break there will target 38.2% retracement of 1.0351 to 1.2445 at 1.1645. For now, risk will stay on the downside as long as 1.2445 resistance holds, in case of recovery.

In the bigger picture, rise from 1.0351 medium term bottom is at least correcting whole down trend from 1.4248 (2021 high). Further rise is expected as long as 1.1644 resistance turned support holds. Next target is 61.8% retracement of 1.4248 to 1.0351 at 1.2759. Sustained break there will pave the way back to 1.4248. This will remain the favored case as long as 55 day EMA (now at 1.1874) holds.

Daily Pivots: (S1) 1.0569; (P) 1.0614; (R1) 1.0651; More...

Intraday bias in EUR/USD remains neutral as sideway trading continues. Further rally is expected as long as 1.0481 resistance turned support holds. Firm break of 61.8% projection of 0.9729 to 1.0481 from 1.0289 at 1.0754 will pave the way to 100% projection at 1.1041. However, firm break of 1.0481 will confirm short term topping and bring deeper fall to 1.0289 support.

In the bigger picture, focus stays on 38.2% retracement of 1.2348 (2021 high) to 0.9534 at 1.0609. Rejection by 1.0609 will suggest that price actions from 0.9534 medium term bottom are developing into a corrective pattern. Thus, medium bearishness is retained for another fall through 0.9534 at a later stage. However, sustained break of 1.0609 will raise the chance of trend reversal and target 61.8% retracement at 1.1273.

Daily Pivots: (S1) 0.6678; (P) 0.6705; (R1) 0.6727; More...

AUD/USD's fall from 0.6892 extends lower today and intraday bias stays on the downside. Firm break of 38.2% retracement of 0.6169 to 0.6892 at 0.6616 will indicate rejection by 0.66871 fibonacci level. Deeper fall should then be seen to 61.8% retracement at 0.6445. For now, risk will stay mildly on the downside as long as 0.6742 resistance holds, in case of recovery.

In the bigger picture, it's still unsure if price actions from 0.6169 medium term bottom are developing into a corrective pattern or trend reversal. Rejection by 38.2% retracement of 0.8006 to 0.6169 at 0.6871 will maintain medium term bearishness for another fall through 0.6169 at a later stage. However, firm break of 0.6871, and sustained trading above 55 week EMA (now at 0.6900) will raise the chance of the start of a bullish up trend.

Daily Pivots: (S1) 1.3619; (P) 1.3656; (R1) 1.3689; More....

Further rise is still in favor in USD/CAD despite loss of upside momentum. Rise from 1.3224 would target 1.3807 resistance. Break there will bring retest of 1.3976 high. On the downside, however, break of 1.3516 support will suggest that the rebound has completed, and turn bias back to the downside.

In the bigger picture, as long as 1.3222 cluster support (38.2% retracement of 1.2005 to 1.3976 at 1.3223) holds, larger up trend from 1.2005 (2021 low) is still expected to resume through 1.3976 high at a later stage. However, firm break of 1.3222/3 will indicate that the trend might have reversed. Deeper fall would be seen to next cluster support at 1.2726 (61.8% retracement at 1.2758).

Daily Pivots: (S1) 0.8703; (P) 0.8720; (R1) 0.8749; More...

For now, further rise will remain mildly in favor in EUR/GBP with 0.8675 minor support intact, for 0.8827 resistance. Firm break there will argue that whole decline from 0.9267 has completed and turn near term outlook bullish. On the downside, break of 0.8675 minor support will bring retest of 0.8545 low, and retain near term bearishness.

In the bigger picture, fall from 0.9267 is seen as a down leg inside long term range pattern. Deeper fall could be seen towards 0.8201/8338 support zone. But strong support should be seen there to bring reversal. Nevertheless, firm break of 0.8827 resistance will turn favor to the case that such decline is merely a correction in the up trend from 0.8201. That is, further rally would be seen at a later stage through 0.9267.

Daily Pivots: (S1) 1.5785; (P) 1.5826; (R1) 1.5875; More...

EUR/AUD's rally resumed after brief retreat and intraday bias is back on the upside. Current rise from 1.4281 should target 61.8% projection of 1.4281 to 1.5704 from 1.5271 at 1.6150. On the downside, below 1.5773 minor support will turn intraday bias neutral and bring consolidations again, before staging another rise.

In the bigger picture, strong support from 55 day and 55 week EMA affirms underlying bullishness. As long as 1.5271 support holds, rise from 1.4281 medium term bottom is expected to continue to 1.6434 key resistance next. Decisive break there should confirm medium term bullish trend reversal.