Price action for the remainder of the day should be rather boring, with US markets closed for the holiday Monday and market participants fully aware of the lack of liquidity that will result from this. The most interesting moves in the FX market on Friday came from the Yen and Swissie, with both currencies selling off quite sharply following the US data, but then returning to form and rallying to close back by daily opening levels. Both currencies trade by significant highs against the USD and should continue to be watched closely as their fates are most probably tied to the fate of the broader markets. Risk has been a main theme over the past several months and both the Yen and Swissie are heavily correlated to this theme. We have actually been hearing that many hedge funds have officially bailed out of their long Usd/Jpy positions, which could open the door for yet another drop to fresh multi-year lows.
The Bank of Japan policy meeting is underway and continues through Tuesday, and we suspect that we may start to hear more rhetoric over the state of the Yen as the meeting reaches its latter stages. In Australia, it looks as though some clarity is starting to come through with regards to the latest election, with Labour the likely candidate to emerge as the party to take control. The RBA is also set to meet on Tuesday and it is widely expected that the Australian central bank will leave rates on hold. Looking ahead, the calendar is exceptionally light for the remainder of Monday, with the only key release coming from Eurozone sentix investorconfidence (9 expected) due at 8:30GMT.
Written by Joel Kruger
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