Yes, of course the Euro is in focus today with the ECB, but it’s perhaps best to wait at least until the end of the day to try and draw any questions. Meanwhile, USDJPY made an interesting statement yesterday.
USDJPY touched a new low yesterday but then rallied as the FOMC had little new to say as its policy appears to be highly data dependent in the coming weeks until the Fed’s Jackson Hole conference at the end of the month and the next FOMC meeting to follow soon thereafter on September 13th. By then, the FOMC will likely have gathered enough of an impression of the situation to decide whether to act.
Overnight, we had the IMF throwing the BoJ a bone by declaring that the yen was “moderately overvalued”, which could be used as an excuse to intervene once again. As well, overnight the BoJ’s Morimoto was out repeating that the BoJ will continue to act, though there was nothing new in his statement and it was effectively just an underlining of current policy.
Chart: USDJPY
An interesting engulfing bullish formation in USDJPY yesterday at what effectively amounts to a double bottom. The bullish argument now seeks confirmation as we head into today’s ECB meeting, which will have a bearing on overall risk appetite and the direction in bond markets as well (with more strength in bonds pressuring the JPY to appreciate while the pair may rally further if bonds ease further here) and then we have Friday’s important US data. The first important resistance is the 200-day moving average and the 79.00 area. If we head back below 78.00 instead, we should expect plenty of noise from the BoJ.
John J Hardy,
SAXO BANK