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BOJ keeps rates steady but lowers inflation


Forex news for Asia-Pacific trading on October 31,2018

Markets:

  • Gold is down -$5.00 or -0.40% at $1218
  • WTI crude oil is up $0.18 or 0.27% at 66.36
  • Nikkei 225 is up 350 points or 1.66% at 21816
  • Shanghai composite is up 29 points or 1.13% at 2597.05
  • S&P futures are up 4 points
  • Dow futures are up 23 points
  • The USD is the strongest. the AUD is the weakest.

The Asia-Pacific session had a number of releases to deal with:

  • Early on the private crude inventory data from the US showed a bigger build once again. However, old price shrugged it off and is trading up about $0.18. 
  • NZ building permits were lower at -1.5% for the month but comes after a 6.8% gain the prior month.  Plus data in housing can be skewed on a MoM basis
  • S. Korea came out with weaker industrial production (the lowest YoY increase in 9-years)  That can be a prelude to lower stocks, but the Kospi is trading up 5.67 points or up 0.28%.  The market ignored the data
  • Japan industrial production was also weaker at -1.1% vs -0.3%.  The Nikkei is up 1.6%.
  • Australia CPI data for 3Q came out weaker at 0.4% vs 0.5%. The core data also came in at 0.4%. That data helped to send the AUDUSD lower.  The AUD was the weakest currency of the majors in the first 8 hours of trading in the new day.  
  • China manufacturing and non-manufacturing PMI data was weaker as well with the data showing some signs of cracks from trade. Although both measures stayed above the 50 level (manufacturing just barely at 50.2 (vs 50.6 expected), the stocks markets were not all that concerned with the Shanghai up 1.13%. However, the AUD and the NZD were pushed a bit lower in reaction to the weakness.  

Finally BOJ kept rates unchanged but lowered inflation expectations:

  • median core CPI forecast for 2018/19 at 0.9% versus 1.1% in July
  • median core CPI forecast for 2019/20  1.4% versus 1.5% in July
  • median core CPI for 2000/21 at 1.5% versus 1.6% in July

When you are trying to climb the mountain to the 2% target with very little success, lowering projections is disheartening.   The USDJPY traded to the highest level since October 9th.

Below is the snapshot of the strongest and weakest of the major currencies so far today:


The USD, GBP and CHF are all fighting it out for the strongest. The AUD has a big lead on the downside. Remember, the CPI data for it came in weaker than expectations. 

Looking at the ranges and the changes, when the EURUSD, GBPUSD, USDJPY and USDCHF are with 6 pips of the closing levels and ranges are mostly <30 pips (with EURUSD, GBPUSD and USDCHF less than 17 pips), you can’t get too excited with the start of the trading day.  

Some technical thoughts going into the European/London session:

  • EURUSD has traded to the low from last Friday at 1.1335.  A move below that level will look toward the 200 week MA at 1.1311. The 1.1300 is the August low and low for 2018.  Those are all key targets on more weakness.  If the buyers lean against the low from last week at 1.1335 and push higher today, the 100 hour MA is moving lower and is at 1.1377. The price tested that MA at the highs on Friday, Monday and Tuesday.
  • The GBPUSD had a low yesterday at 1.2695  and a low today so far at 1.2695. A break will look toward the 2018 low from August at 1.26612.  A break below opens the door for more selling.   On the topside the 100 hour MA is about 100 pips higher at 1.28056 (and moving lower).  It seems like a long way away. 
  • The USDJPY moved up to test a topside trend line at 113.28. In fact, the price moved above the level to a high of 113.32 but backed off (to a corrective low of 113.11).  The price is back into the 113.20s (at 113.22). So not far from the topside trend line. A move above (and staying above) would open the door for further gains in that pair. 
  • The AUDUSD fell on the back of slightly lower inflation data (0.4% vs 0.5% QoQ), but has spent most of the time over the last 4-hours between the 200 hour MA at 0.70856 and the 100 hour MA below at 0.7079.  The pair is looking for the next kick lower or higher from that area.  
  • The NZDUSD moved up to a swing area in the 0.6567-72 area and stalled. The subsequent fall, took the price down to the 200 hour  MA at 0.6543 where again it has stalled.  So seller above and buyers are below.  We are trading near the low support area so sellers are trying to kick the pair lower. 
  • An interesting development in the GBPAUD cross pair.  The 100 and 200 day MA are converged with the price at the 1.7928 level.  That is the ultimate neutral level.  Markets tend to get nervous around such harmonious technical levels and look for a reason to move away.  Does the break go higher or lower.  Look for momentum in one or the other direction.   

Good fortune with your trading….



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