XE Market Analysis: Europe - Jan 21, 2015 USD-JPY losses after - TopicsExpress

XE Market Analysis: Europe - Jan 21, 2015 USD-JPY losses after the BoJ statement led broader dollar losses today in Tokyo. The pair lost over a big figure from Tuesdays closing levels in making a low of 117.55. This matched yesterdays low and swings Mondays low at 116.92 into view. The BoJ refrained from expanding its stimulus program, leaving the annual pace of increase its monetary base at Y80 tln, although it cut next fiscal years CPI forecast (starting April) to 1.0% from the 1.7% projected three months ago. A Bloomberg survey found 26 of 33 of economists forecast new BoJ monetary expansion by the end of October, though the lack of action today disappointed markets to a degree and caused the yen to firm across the board. The Nikkei stock index also closed 0.5% for the worse, while gold lifted to five-month highs above $1300 on safe haven demand. Dollar softness saw EUR-USD rebound to the upper 1.15s and Cable to the 1.51s, both remaining within respective Tuesday ranges, while AUD-USD managed to lift to two-day peak of 0.8223. [EUR, USD] Dollar softness, led by USD-JPY weakness after the BoJ refrained from expanding monetary stimulus today, saw EUR-USD rebound to the upper 1.15s. Recent daily highs at 1.1639 and 1.1649 form a key resistance zone ahead of the ECB meeting today. Given prevailing expectations, we feel that anything less than a EUR 600 bln quant buying program tomorrow may spark an on-the-fact reaction, which could propel euro quiet sharply higher over the nearer term (we thinking to 1.1700-plus levels), though we would still anticipate that the overall bear trend would remain in place. [USD, JPY] USD-JPY lost over a big figure from Tuesdays closing levels in making a low of 117.55. This matched yesterdays low and swings Mondays low at 116.92 into view. This came as the BoJ refrained from expanding its stimulus program, leaving the annual pace of increase its monetary base at Y80 tln, although it still cut next fiscal years CPI forecast (starting April) to 1.0% from the 1.7% projected three months ago. A Bloomberg survey found 26 of 33 of economists forecast new BoJ monetary expansion by the end of October, though the lack of action today disappointed markets to a degree and caused the yen to firm across the board. The Nikkei stock index also closed 0.5% for the worse. e still expect USD-JPY to remain biased higher in the bigger picture as Abenomics policies remain alive and well in Japan. Support is at 116.92-117.00, resistance at 118.00 ahead of the 50-day moving average at 118.69 and the 20-day average at 118.89. [GBP, USD] Sterling has traded firmer over the last day. Bank research notes in circulation seem to be focusing on todays UK labour market data, which is expected to see both the claimant count rate and unemployment fall to new cycle lows, to 5.9% from 6.0% in the case of the latter. This would bring the BoEs 5.5% inflation-risk threshold into scope, the point at which it estimates would start to trigger inflationary pressures via higher wage demands. Average weekly earnings will be scrutinized in this regard, and we expected new cycle highs y/y rates in three months to Nov, of 1.7% in the including-bonus figure. There is also conjecture downplaying the drop in Dec CPI to 0.5% due to base effects (a price hike in energy bills in Dec 2013 dropped out) and the one-off oil price decline impact, though this is competing with the view that economic stagnation in the Eurozone may wield an increasing impact on the UK. [USD, CHF] EUR-CHF continues to ply a choppy path in the low 1.0s after the SNB unexpectedly abandoned the franc cap on Jan-15. Swiss economy minister Schneider-Ammann said this week that uncertainty over franc rate may last for months. Lots of downward Swiss growth forecasts have been coming as a consequence of this. UBS has led the way, slashing its 2015 forecast to 0.5% y/y from 1.8% y/y, and to 1.1% y/y from 1.7% for 2016, saying that watch exporters will be most affect by the surge in the francs surge. S&P Ratings said, however, that while exports will be impacted, Switzerlands strong economy and solid public finances will resist this exchange rate shock, and that its ratings of Swiss sovereign debt are unaffected. The SNB argued yesterday that while the Swiss franc is still high, the overvaluation has decreased as a whole since the introduction of the minimum exchange rate, and that the economy is able to take advantage of this phase to adjust to the new situation. [USD, CAD] USD-CAD hit fresh major-trend high at 1.2114 after smashing recent consolidation highs. A fresh bout of oil price weakness following the IMFs global growth downgrade on Tuesday prompted the move. Low oil prices are bad for the Canadian dollar as it erodes Canadas terms of trade. Some energy analysts are expecting NYMEX oil prices to trade another 10% lower before basing, which would see the 2009 low in NYMEX crude at $40.68 breached. USD-CADs August 2009 high at 1.3063 provides a big-picture target.