The Bank of Japan monetary policy was the main story overnight and a later-than-scheduled response led to speculation that they would surprise markets with an additional injection of economic stimulus (most likely coming in the form of increases to its JGB asset purchase program) but wound up not being the case, and the Japanese Yen saw a moderate rally on the disappointment. The “no change” decision is a marked change the stance established at the previous policy meeting and with the Nikkei 225 approaching the psychologically significant 10,000 level, we could see some pullback in regional equity markets.
Market attention will now shift to the FOMC meeting in the US today, although markets are not expecting any changes in its interest rate bias. The Federal Reserve has made it clear for the most part that policy will remain accommodative for the remainder of this year and this is unlikely to change as long as there are not major surprises in the underlying economic releases. This time around, there will be no press conference after the official decision is made, so this makes it less likely that we will see a change in the central bank’s general bias. There is a good possibility that the recent strength in employment data will be acknowledged, and the optimism could help push the S&P into positive territory in today’s trading.
In Greece, there were positive headlines as the first phase of the bond exchange program were completed, with 177 billion Euros refinanced. The Euro was able to bounce off of the 1.31 level after the news and regional equity markets reversed some of the losses seen earlier this week. The rally was relatively unimpressive, however, and this lack of upside shows that the market is already heavily “long” in equities and there are not enough new participants to push the market higher.
Macro data today will likely not get the headlines it deserves but there are some significant releases today, with US Retail Sales and Business Inventories scheduled for before the New York open. UK data will be seen with the national Trade Balance and DGLC Housing Prices. Corporate earnings from Prudential, Antofagasta, Standard Life, and Close Brothers will also be released. In Europe, Eurozone and German ZEW Survey, Italian French and Spanish Consumer Price Index (CPI) and Current Account data, and Swiss Producer Prices will be released today.
The EUR/JPY has bounced once again within its post January rally, with support now moving up to the 105.50 area. This is the key area to the downside, as a break will remove the bullish bias on the shorter term time frames. Momentum remains positive on the daily charts but we are approaching overbought territory, so buying on dips here is the preferred strategy. If the first support does go, wait for a test of 101.80 before entering into new longs.
Oil prices are now consolidating at the highs, and the lack of meaningful pullback from the elevated area is encouraging for the longer term prospects. Oil has yet to test resistance turned support at 103 so longs here are a little risky. Prefer to see a test of 103 before entering into longs but we might not see the opportunity as the MACD reading continues to show positive momentum.