The EURJPY still bearish – Analysis – 13-12-2023
The EURJPY still bearish – Analysis – 13-12-2023
Trend strong bearish
new sell signal today
The EURJPY pair confirmed its affection by the domination of the bearish bias due to the frequent negative closings below 157.60 resistance, forming sideways fluctuation near 157.00 due to the continuous contradiction between the major indicators.
Note that it is important to gather the negative momentum to manage to activate the bearish attack, to expect crawling towards 155.90 level soon, while breaking this obstacle will push the price to 155.40 as a next main target.
The expected trading range for today is between 157.35 and 155.90
The expected trend for today: Bearish
Trend strong bearish
new sell signal today
The EURJPY pair confirmed its affection by the domination of the bearish bias due to the frequent negative closings below 157.60 resistance, forming sideways fluctuation near 157.00 due to the continuous contradiction between the major indicators.
Note that it is important to gather the negative momentum to manage to activate the bearish attack, to expect crawling towards 155.90 level soon, while breaking this obstacle will push the price to 155.40 as a next main target.
The expected trading range for today is between 157.35 and 155.90
The expected trend for today: Bearish
Comment:
EUR/JPY has broken above a prior level of horizontal resistance and continues to print fresh 15-year highs. All three moving averages are supportive of the move higher and while the CCI indicator suggests that EUR/JPY is overbought, it is not an extreme signal yet. Prior resistance at 159.70 should now act as first-line support before a cluster of prior highs above 158 come into focus.
Trade closed: target reached:
Profit taking 155
Trade closed
Trend i revearsing
Do Not TAKE THI TRADE
Trade closed
Trend i revearsing
Do Not TAKE THI TRADE
Trade active:
new sell Signal
EUR breaking below 200D EMA
EUR breaking below 200D EMA
Comment:
Short term trend bearish
took a short at 157
potential retracement 154 200EMA9
took a short at 157
potential retracement 154 200EMA9
Comment:
Shorter-dated and front-end expiry FX option implied volatility trades near long-term lows in many of the major currency pairs, but appears to be finding support.
A recent increase in risk appetite amid falling realised FX volatility has weighed on option premium ahead of the Christmas and New Year holiday lull. However, the delicate balance between time decay and potential amplified FX volatility - especially towards month-end in thin holiday markets - seems to have reached an equilibrium.
Markets exhibit a more aggressive stance on 2024 rate cut expectations than major central banks are hinting at. This disparity might lead to increased FX volatility as these views converge, drawing buyers towards the existing low implied volatility levels.
JPY related implied volatility fell after the Bank of Japan maintained its dovish bias on Tuesday, but it failed to threaten recent lows as focus shifts to BoJ meetings in early 2024. On Thursday, one-month included the Jan.23 BoJ meeting and related implied volatility and JPY call premium gains show that dealers are taking no chances. However, the March and April meetings are deemed more likely to see a rate hike and related volatility/JPY gains.
A recent increase in risk appetite amid falling realised FX volatility has weighed on option premium ahead of the Christmas and New Year holiday lull. However, the delicate balance between time decay and potential amplified FX volatility - especially towards month-end in thin holiday markets - seems to have reached an equilibrium.
Markets exhibit a more aggressive stance on 2024 rate cut expectations than major central banks are hinting at. This disparity might lead to increased FX volatility as these views converge, drawing buyers towards the existing low implied volatility levels.
JPY related implied volatility fell after the Bank of Japan maintained its dovish bias on Tuesday, but it failed to threaten recent lows as focus shifts to BoJ meetings in early 2024. On Thursday, one-month included the Jan.23 BoJ meeting and related implied volatility and JPY call premium gains show that dealers are taking no chances. However, the March and April meetings are deemed more likely to see a rate hike and related volatility/JPY gains.
Comment:
the bullish sentiment in the yen makes the yen stronger and a stronger yen will help inflation ease in Japan, and slow inflation will allow the Bank of Japan (BoJ) to remain relaxed about normalizing policy. Indeed, released this morning, the BoJ core inflation fell more than expected to 2.7%. Bingo! Therefore, it looks like the USD/JPY’s downside potential may be coming to a point of exhaustion near the 140 – in the absence of fresh news.
Comment:
BIG IN JAPAN
BOJ’s Ueda Prepares Ground for Rate Hike With Salvo of Comments
Bank of Japan Governor Kazuo Ueda continued to prepare the ground for the nation’s first interest rate increase since 2007 with another round of comments that further build the case for a move in the spring while not ruling out the less probable option of a January hike. “It’s possible to make some decisions even if the bank doesn’t have the full results of spring wage negotiations from small- and middle-sized businesses,” the governor said in an interview with public broadcaster NHK released Wednesday. The latest comments from the governor, in a busy week of signaling from the central bank, suggest the BOJ may be less likely to wait until July to raise rates when more complete pay deal data is compiled by Rengo, the nation’s largest union federation.
Ueda said the chances of having enough information to support a policy change by the central bank’s January meeting were not so high, but he refused to rule out that possibility.
The governor’s remarks are likely to support the view among economists that the central bank will move in April after it has assessed early annual pay deal figures due in March and confirmed the economy is expanding again with gross domestic product data scheduled for release in February. Unlike its peers among advanced economies, Japan has long sought to spur inflation as a way of reinvigorating growth and activity. While the Federal Reserve and the European Central Bank raised rates aggressively to tackle soaring prices, the BOJ has stuck with the world’s last remaining negative interest rate as it tries to fuel a positive cycle of inflation supported by pay gains.
BOJ’s Ueda Prepares Ground for Rate Hike With Salvo of Comments
Bank of Japan Governor Kazuo Ueda continued to prepare the ground for the nation’s first interest rate increase since 2007 with another round of comments that further build the case for a move in the spring while not ruling out the less probable option of a January hike. “It’s possible to make some decisions even if the bank doesn’t have the full results of spring wage negotiations from small- and middle-sized businesses,” the governor said in an interview with public broadcaster NHK released Wednesday. The latest comments from the governor, in a busy week of signaling from the central bank, suggest the BOJ may be less likely to wait until July to raise rates when more complete pay deal data is compiled by Rengo, the nation’s largest union federation.
Ueda said the chances of having enough information to support a policy change by the central bank’s January meeting were not so high, but he refused to rule out that possibility.
The governor’s remarks are likely to support the view among economists that the central bank will move in April after it has assessed early annual pay deal figures due in March and confirmed the economy is expanding again with gross domestic product data scheduled for release in February. Unlike its peers among advanced economies, Japan has long sought to spur inflation as a way of reinvigorating growth and activity. While the Federal Reserve and the European Central Bank raised rates aggressively to tackle soaring prices, the BOJ has stuck with the world’s last remaining negative interest rate as it tries to fuel a positive cycle of inflation supported by pay gains.
Comment:
Japanese core inflation falls to 2.5%, as expected
US to release PCE Price Index on Friday
The Japanese yen is showing little movement on Friday. In the European session, USD/JPY is trading at 142.03, down 0.06%.
Japanese core inflation eases to 2.5%
Japan’s Core CPI, which excludes fresh food but includes fuel costs, dropped to 2.5% in November, matching the consensus estimate. This was down from the October gain of 2.9% and marked the lowest reading since July 2022. Still, it was the twentieth consecutive month that the core rate has exceeded the Bank of Japan’s target of 2%. The headline figure dropped to 2.8%, down from 3.3% in October.
The yen shrugged off the drop in inflation, taking a breather after surging 1% a day earlier. The sharp gains were driven by the third-estimate US GDP for Q3, which came in at 4.9%, lower than the second estimate of 5.2%. The drop in GDP was driven by weaker consumer spending, but the economy remains strong, as the 4.9% gain was the highest level since Q4 2021.
The BoJ released on Friday the minutes of its October 31 meeting, when the central bank unexpectedly tweaked its yield curve control (YCC) program. The yen took a bath and fell 1.78% on the day of the meeting, as the markets viewed the move as a step by the BoJ’s to phasing out its ultra-easy monetary policy. The minutes indicated that board members were divided on whether the BoJ should make clear that the tweak was not a step towards ending YCC, or should the Bank “not strongly deny” that the tweak could lead to an end of YCC. The debate highlights that board members are well aware that a shift in policy can have a significant impact on the currency markets, as was evident with the yen’s plunge following the October meeting.
The US wraps up the week with the PCE Price Index, which is considered the Federal Reserve’s preferred inflation indicator. The headline and core readings are expected to remain unchanged in November, at 0.2% and 0%, respectively. Recent inflation readings have had a strong impact on the movement of the US dollar, and that could be the case later today if the headline or core rate readings are wide of the estimates.
US to release PCE Price Index on Friday
The Japanese yen is showing little movement on Friday. In the European session, USD/JPY is trading at 142.03, down 0.06%.
Japanese core inflation eases to 2.5%
Japan’s Core CPI, which excludes fresh food but includes fuel costs, dropped to 2.5% in November, matching the consensus estimate. This was down from the October gain of 2.9% and marked the lowest reading since July 2022. Still, it was the twentieth consecutive month that the core rate has exceeded the Bank of Japan’s target of 2%. The headline figure dropped to 2.8%, down from 3.3% in October.
The yen shrugged off the drop in inflation, taking a breather after surging 1% a day earlier. The sharp gains were driven by the third-estimate US GDP for Q3, which came in at 4.9%, lower than the second estimate of 5.2%. The drop in GDP was driven by weaker consumer spending, but the economy remains strong, as the 4.9% gain was the highest level since Q4 2021.
The BoJ released on Friday the minutes of its October 31 meeting, when the central bank unexpectedly tweaked its yield curve control (YCC) program. The yen took a bath and fell 1.78% on the day of the meeting, as the markets viewed the move as a step by the BoJ’s to phasing out its ultra-easy monetary policy. The minutes indicated that board members were divided on whether the BoJ should make clear that the tweak was not a step towards ending YCC, or should the Bank “not strongly deny” that the tweak could lead to an end of YCC. The debate highlights that board members are well aware that a shift in policy can have a significant impact on the currency markets, as was evident with the yen’s plunge following the October meeting.
The US wraps up the week with the PCE Price Index, which is considered the Federal Reserve’s preferred inflation indicator. The headline and core readings are expected to remain unchanged in November, at 0.2% and 0%, respectively. Recent inflation readings have had a strong impact on the movement of the US dollar, and that could be the case later today if the headline or core rate readings are wide of the estimates.
Comment:
BoJ Summary of Opinion highlights split over shift in policy
The Japanese yen continues to have a quiet week. In the European session, USD/JPY is trading at 142.54, up 0.12%.
The Bank of Japan’s summary of opinions from the December meeting was released earlier today. That meeting was somewhat of a disappointment to the markets, as there were expectations of a move after senior BoJ members hinted prior to the meeting that the Bank was looking to lift interest rates out of negative territory. In the end, the BoJ stayed put and maintained policy settings.
The summary highlighted the split amongst board members regarding the exit from ultra-loose monetary policy. One member stated that the timing of normalizing policy was “getting closer” but another member said that the BoJ could wait until after wage talks next spring.
The internal debate revolves around the key question as to when inflation will become sustainable at the 2% target. Governor Ueda has argued that wage growth must increase before inflation is sustainable and that the current high rate of inflation is due to cost-push factors. This means that national wage talks in April will play a key role in determining the BoJ’s rate policy. The takeaway from the summary is that an exit from ultra-loose policy is a question of when rather than if, and that there are differences of opinion within the central bank as to the timing of a shift in policy.
We have seen that tweaks to the yield curve control program have triggered sharp movement from the yen, and it’s a safe bet that a shift in policy would send the yen flying higher. BoJ policy meetings have become market-moving events and every comment from a senior BoJ official has the potential to shake up the currency markets. The BoJ holds its next meeting on January 22-23.
The Japanese yen continues to have a quiet week. In the European session, USD/JPY is trading at 142.54, up 0.12%.
The Bank of Japan’s summary of opinions from the December meeting was released earlier today. That meeting was somewhat of a disappointment to the markets, as there were expectations of a move after senior BoJ members hinted prior to the meeting that the Bank was looking to lift interest rates out of negative territory. In the end, the BoJ stayed put and maintained policy settings.
The summary highlighted the split amongst board members regarding the exit from ultra-loose monetary policy. One member stated that the timing of normalizing policy was “getting closer” but another member said that the BoJ could wait until after wage talks next spring.
The internal debate revolves around the key question as to when inflation will become sustainable at the 2% target. Governor Ueda has argued that wage growth must increase before inflation is sustainable and that the current high rate of inflation is due to cost-push factors. This means that national wage talks in April will play a key role in determining the BoJ’s rate policy. The takeaway from the summary is that an exit from ultra-loose policy is a question of when rather than if, and that there are differences of opinion within the central bank as to the timing of a shift in policy.
We have seen that tweaks to the yield curve control program have triggered sharp movement from the yen, and it’s a safe bet that a shift in policy would send the yen flying higher. BoJ policy meetings have become market-moving events and every comment from a senior BoJ official has the potential to shake up the currency markets. The BoJ holds its next meeting on January 22-23.