BoJ Leaves Policy On Hold

Daily Analysis - 07/10/2015

Latest Monetary Policy Decision Sees Bank of Japan Leave Quantitative Easing Program Unchanged


The Japanese Yen is trading firmer following the Bank of Japan decision to leave interest rates and the QQE stimulus package unchanged at during today’s meeting. The Central Bank, in its monetary policy statement noted that it remained optimistic about reaching the 2% target inflation rate.

Crude Oil Surges

Crude oil prices rose sharply yesterday, climbing over 6.00% to close the day near the highs of $49.00 following a rapid rally in prices and breakout from a recent consolidation. The gains in oil benchmarks comes on the heels of prolonged sideways price action which saw prices trading within the highs and lows of $48.00 and $44.11 respectively. Investors should conceivably expect to see a pullback in prices with a decline back to the range high of $48 to establish the support ahead of further gains not an unreasonable possibility. While API reported a drawdown of -1.200 million barrels yesterday, the EIA weekly crude oil inventories report due later this evening is forecast to show US commercial stockpiles storage having posted a an increase of 2.200 million barrels. The gains in oil prices saw commodity currencies such as the Canadian Dollar and Norwegian Krone post solid gains.


Kiwi Dollar Hits Multi-Week Highs

The NZDUSD currency pair continued to post strong gains since prices hit a low of 0.6236 two weeks ago. The strong gains in the Kiwi come amid the global dairy trade index data released yesterday, showing gains of 9.90%. Despite posting a lower print from last month’s 16.50%, the GDT data has managed to remain in the postive for the past 4 bi-weekly releases after global dairy prices declined by as much as -10.00%. The Kiwi dollar also gained from the previous risk-off sentiment led by a softer US Dollar. On the weekly charts, NZDUSD looks to have formed a short-term base near the 0.6256 support level with the current rally indicating a correction to the longer-term downtrend. The next main resistance level comes in at 0.7150 through the 0.7330 region, provided prices climb above the short-term top formed near 0.6680 around the week of August 16th.


Japanese Monetary Policy Unchanged

The Bank of Japan opted to leave monetary policy unchanged during today’s meeting. The Central Bank sounded optimistic on reaching its inflation target of 2.00% and decided to hold off any further expansion of its existing simulus program which is currently conducting purchases at a rate of around ¥80 trillion per year. The Bank of Japan’s decision comes amid economist and analyst speculation that the Japanese Central bank would expand its Quantitative and Qualitive Easing program during the October meeting. The inaction by the Bank of the Japan led the Yen to post modest gains across the board. USDJPY turned lower after posting a session high of 120.36 during the overnight session to trend lower towards current levels near 120.06. Price action remains range bound within the larger consolidating triangle with the next immediate support sitting at 119.57.


UK Manufacturing Ahead

After a weak PMI print earlier this month, the UK's manufacturing and industrial production figures are due during the morning session at 09:30 GMT. Expectations are for manufacturing production to have posted soft gains, rising 0.30% for the month while industrial production is expected to have risen 0.30%, up from -0.80% and -0.40% respectively in the prior month. The GBPUSD currency pair managed to close on a bullish note yesterday, but remains range bound, with prices consolidating for the past three daily sessions. Today's price action in the pair is beginning to show signs of a potential upside breakout. The correction towards 1.5300 region remains on track provided prices are supported above the key 1.5131 level in the near-term. Industrial and manufacturing data have remained weak over the past few months and a surprise beat on the estimates could see GBPUSD potentially stage a rally.


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