Yen thrown overboard post BOJ, ASX selloff looks stretched

The BOJ held their interest rate at 0.25%, but it seems there was still some hope they might have raised rates, given the yen's response. Even if the odds of a hike yesterday were greatly diminished, just a few weeks ago the odds firmly backed one. Furthermore, their tone was quite dovish, indicating that the central bank is in no rush to raise rates. While I suspect they will be in a better position to next year, yesterday’s moves were in the response to any hopes of an imminent hike dying a sudden death.

The Japanese yen was the clear laggard among FX majors on Thursday, with most of them far exceeding their average daily ranges. Only NZD/JPY failed to exceed its 10-day ATR as the Kiwi dollar faced selling pressure due to a weak and recessionary GDP report. Growth contracted for a second quarter in New Zealand to confirm a technical recession.

CHF/JPY was the strongest major against the yen, rising 2% during its best day in two years
GBP/JPY smashed its way above the 2015 high in style, and in line with my bullish bias.
USD/JPY reached a 5-month high during its most bullish day in six weeks

The Bank of England held interest rates at 4.75% as expected, although three MPC members voted to cut as opposed to two. This makes it slightly less dovish than expected, prompting the pound to further ground against the US dollar and send GBP/USD to within pips of its November low.

ASX 200 futures (SPI 200) technical analysis:

ASX futures have fallen around -5.4% from the December high, but the November low is close by and bearish momentum is waning. The daily bullish RSI (2) has formed a bullish divergence within the oversold zone and post-FOMC price action has made hard work of continued losses (looking at price action on the 1-hour chart). A bullish divergence has also formed on the 1-hour RSI (14).

The November low is so close that I suspect the market will try and break it early in today’s session. But I am sceptical prices will close beneath it today, given Wall Street indices held their ground above their FOMC lows and we’re at that time of year that indices tend to rally.

I’m not looking for strong gains, but I see the potential to at least partially retrace from of their FOMC losses.

Also, we’re at that time of year that indices tend to do well irrespective of fundamentals. The average daily returns for the ASX 200 tend to be positive alongside a positive win rate between December 19^th – 30^th.

Economic events in focus (AEDT)

10:30 – JP CPI
11:30 – AU housing credit
12:00 – CN loan prime rate
13:00 – NZ credit card spending
18:00 – UK retail sales
23:30 – FOMC Daly speaks
00:30 – US PCE inflation

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.