Sometimes there is just nothing going on. Foreign exchange markets were quiet overnight with most of the major currencies exhibiting very small trading ranges as traders await the earnings reports due out from companies as well as the ECB meeting later this week.
The one currency with any movement overnight was the USD/JPY which moved to a high of 87.74 as Japanese corporates were the main buyers of the currency pair. The BOJ meets on January 21-22 and traders are expecting the announcement of a 2% inflation target and more easing from the central bank.
The were promises that were made by Prime MInister Shinzo Abe before his election last month. Abe has been calling for “strong†and “bold†monetary easing that will revitalize the Japanese economy and this has certainly been priced into the market. Right now resistance for the USD/JPY is at 88.00. The markets are starting to talk about the 90 level for the currency and if we see something really impressive out of the BOJ, such as open ended monetary purchases, we could the the Japanese Yen weaken further.
ECB meeting tomorrow has EUR traders pretty much sitting on their collective hands ahead of the meeting and following press conference by President Draghi. As usual, the single currency is slowly drifting higher ahead of the meeting. While no one is really expecting a rate cut this month, the general consensus is that there will be a cut sometime during Q1 and all eyes and ears will be focused on President Draghi’s remarks. Many feel that not only will the ECB cut their main rate to 0.50% by March, but that the deposit rate, which is currently at 0%, may enter negative territory. Weak economic data from the fourth quarter of last year tells us that the Eurozone recession could continue into the first quarter of this year. If that is the case the ECB may be forced to stimulate the economy.
EUR traded in a 30 point range overnight coming close to testing the 1.3100 resistance level, (1.3095 was the high), but not quite reaching there. Support for the single currency is at 1.3060, then 1.3035.
All the other currencies had similar overnight ranges and it looks as though intraday bias will remain neutral for today.
Further reading:Â Japan Presents: A Moral Currency War
