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MARKET DEVELOPMENTS – BOJ INTERVENES FOR A 3RD TIME IN A WEEK
Relatively quiet start to the week ahead of key risk events scheduled throughout the week. US equity futures trading in mixed fashion (DJIA +0.1%, Nasdaq 100 -0.1%, S&P 500 -0.1%) as global equities fail to find any firm direction.
JPY: Overnight, the Bank of Japan yet again offered buy an unlimited amount of 5-10yr JGBs at 0.1% (3rd time in one week) after bond yields rose as high as 0.11%, highest level in a yield as markets continue to speculate on the BoJ’s intentions. As such, eyes are on the Japanese Yen ahead of their monetary policy announcement. In terms of option markets, JPY call premium over puts are at the highest in a year, while ATM volatility is currently at the highest level since February.
EUR: Slight lift in the Euro this morning after some encouraging inflation readings out of Germany which remains above the ECB’s target, consequently, this bodes well for tomorrow’s Eurozone inflation data. Elsewhere, tighter US-German spreads from record levels has allowed for EURUSD to make a test for the 1.17 handle.
USD: The US Dollar is softer against its G10 peers, down 0.2%. As we approach month-end, rebalancing models from various banks have indicated strong USD selling against major peers with the exception of the JPY, which is moderate.
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USDJPY: Data shows 58.6% of traders are net-long with the ratio of traders long to short at 1.42 to 1. The number of traders net-long is 0.1% lower than yesterday and 41.4% higher from last week, while the number of traders net-short is 11.8% lower than yesterday and 13.0% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDJPY prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USDJPY-bearish contrarian trading bias
Five Things Traders are Reading
- “US Dollar, EUR/USD Primed for a Heavy Week of FX Data”by James Stanley, Currency Strategist
- “Gold Price Outlook: Bearish Trend Still in Place” by Martin Essex, MSTA, Analyst and Editor
- “EURUSD Analysis: Pair Receives Boost on German State Inflation”by Justin McQueen, Market Analyst
- “GBPUSD Analysis: No-Deal Brexit Fears Outweigh BoE Rate Hike”by Nick Cawley, Market Analyst
- “CoT Update for GBP/USD, AUD/USD, Gold, Crude Oil & Others” by Paul Robinson, Market Analyst
--- Written by Justin McQueen, Market Analyst
To contact Justin, email him at Justin.email@example.com
Follow Justin on Twitter @JMcQueenFX