Tuesday, September 15, 2015

Yen flipped to gains on eventless BOJ, UK CPI, ZEW – Next in focus

FXStreet (Mumbai) - The Bank of Japan (BOJ) left its monetary policy setting unchanged at its monetary policy decision held today, squashing hopes of many doves, who widely anticipated more hints on further easing this October.

Key headlines in Asia

BoJ leaves policy unchanged as expected

Nikkei 225: Nasty risk-off turnaround wipes early gains

RBA minutes: Steady rates appropriate, outlook remains data-dependent

Dominating themes in Asia - centered on JPY, AUD, NZD

A major rebound in risk-off sentiment was seen in Asia following the BOJ decision, with most Asian indices falling deeper into the red. While the Nikkei pared gains after the yen strengthened on the back of BOJ rates on hold stance and also on intensifying risk-off trades.

The Japanese yen erased losses and swung back higher against the US dollar as the BOJ stood pat on its policy decision, playing down expectations for further expansion of the QQE program. USD/JPY slipped from around 120.35 region and dipped to 119.92 lows post BOJ, only to recover slightly to now trade near 120.10, recording a -0.10% loss so far.

The Antipodean currencies halted their recovery mode and fell back into the negative territory as the turnaround in the risk-sentiment hurt the demand for higher yielding currencies. Adding to the negative sentiment around the Aussie, RBA minutes turned out slightly dovish, with the central bank suggesting lower AUD level favored for the economy. At the moment, AUD/USD trades at 0.7130, down -0.10% on the day. While the Kiwi weakened to just above 0.63 handle, following its OZ counterpart lower.

On the equities front, the Asian markets saw a drastic shift in risk-sentiment, with the Japan’s benchmark index, the Nikkei, paring gains to 18,131, up 0.90%. While the Hong Kong's benchmark Hang Seng index drops -0.20% to 21,518 and the Shanghai Composite extends declines to 3,036, -1.22% on the day. The benchmark Australian S&P/ASX 200 was the biggest loser, turning from around +1.5% to now -1.22% at 5,034.

Heading into Europe - centered on EUR, GBP

A busy EUR macro calendar ahead, with the UK CPI print and ZEW figures for Germany and the Euro zone expected to be the main highlights today.

The UK consumer price growth of negative 0.1% is anticipated in August, year-on-year, after a 0.1% advance reported in July, while 0.2% growth in consumer prices is anticipated on a monthly basis, compared to the 0.2% decline reported in July.

The ZEW will release its Economic Sentiment Index for the next six months for Germany, as well as the Current Situation Index, reflecting institutional investors' opinions of whether the current situation.

Economic sentiment is seen heading down to 19.0 in September from 25.0 measured in August, while the Current Situation Index is also expected to fall to 64.5 from 65.7 in the previous month.

Looking towards the New York session, a flurry of US macro data including the critical retail sales and industrial production data will dominate ahead of Thursday’s Fed decision. However, economic data will only play second fiddle to the Fed meeting with markets holding their breath to see whether officials decide to raise rates for the first time in nearly a decade.

EUR/USD Technicals

Valeria Bednarik, Chief Analyst at FXStreet explains, “Technically, a negative tone prevails in the short term, as the 1 hour chart shows that the price is below a bearish 20 SMA, whilst the technical indicators head slightly lower below their mid-lines. In the 4 hours chart, the 20 SMA advanced further higher below the current level, now around the 1.1280 region, whilst the technical indicators hold above their mid-lines, but showing no actual directional strength.”
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