Wednesday, September 19, 2012

Forex Trading Update - BoJ Follows the FED, ECB, ETC

Coming Up Today
  • UK MPC Minutes
  • US Building Permits & Existing Homes Sales
Earlier this morning the big story was that the Bank of Japan has joined the party as it announced at its Monetary Policy Meeting that it would increase its asset buying and loan program, by 10 trillion yen ($127billion) to 80 trillion yen. The move ends months of inaction from the BoJ which had been aggressive with applying economic stimulus earlier in the year before slowing down. The move is partially seen as a defensive play by the BoJ as forex traders expected that a potential run into the yen was possible after the US Fed activated its QE3 plans.

On the news, the USDJPY has jumped to a two week high of 79.21, while the EURJPY continues its two month rally and is trading comfortably above 103.00. Overall, the BoJ news continues the string of risk appetite creating headlines which has buoyed all asset classes in September.
Charts to Watch
EURGBP: The EURGBP was talked up a lot on Friday’s Video Rant. Overall, the idea here is that a return of bond traders getting excited about EU peripheral debt could lead to an exit of funds that have been stashed in UK Gilts. We are already seeing this correlation take place with money coming out of German Bunds. As such, if this trade gets momentum and the EURGBP could be set to break above 0.8100 and subsequently its 0.8160 resistance from earlier this year.
EURUSD: The EURUSD has obviously had its great run higher. While it has seen some profit taking place over the last few days, the 1.3000 figure hasn’t been challenged. As such, with not much expected to arise from the EU this week, it’s worth watching the 1.3000 level to see if it holds and provides support for the EURUSD. If it doesn’t it could lead to short sellers becoming aggressive.

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