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  • Mike Paterson

BOJ rattles markets in surprise move

Tuesday 20 December 2022

The Bank of Japan this morning sprung a big surprise on markets, if only in the timing, by adjusting its YCC policy. Cue JPY shooting higher in rapid fashion, with 10y JGB yields zooming higher causing a halt to trading at one point. BOJ Gov Kuroda then came out and said they had no intention to hike rates or tighten monetary policy but USDJPY has continued its rapid decline to 132.05 from 137.30 with JPY pairs much lower too.

We've seen another little recovery in equity markets this morning but the global landscape remains fragile overall. Gold and oil finding support in the dips still with the former now back above $1800.. China's COVID relaxtion measures still have the jury out and geopolitical risk in Ukraine still lurking too. The Pound looks soggy again on the crosses albeit off its fresh 1.2085 lows again as JPY demand on the crosses caps core pairs too.

Remember, focus on the price action and let the algos do the heavy lifting/dropping. The important thing is to identify your preferred risk/reward entry/exit levels.

GBPUSD: A hold of 1.2085 this time but capping at 1.2200 in the bounce after yesterday's 1.2240 cap. Good two-way business whatever your bias. I remain poised to re=sell. EURGBP: Support line now at 0.8720 and underpinned since the hawkish ECB tones on Thursday.Good two-way action still with sellers into 0.8750-60 still. GBPJPY: So much for the two-way business as BOJ put paid to that but the move here suited my two core books.

EURUSD: A decent hold at the 1.0580 line yet again after capping at 1.0660 as the USD jury remains out and also finding EURJPY sellers. Re-sells duly placed per ongoing strategy. Rinse n repeat. USDJPY: A straight line from 137.30 to 133.20 post BOJ and a further move to test 132.00 after struggling to get back up through 133.50 Pips duly banked and some re-sells made. I prefer the rally-sell side still and I really do the hope the steer has helped. EURJPY: Capping at 145.80 before the drop to 140.30 post-BOJ.Should find some consolidation down here. USDCHF: Capping into 0.9300 now amid some EURCHF supply too but holding 0.9240-50 so far but CHF demand to continue overall. EURCHF: A hold at 0.9820 this time after capping around 0.9870 and we continue to range. Good two-way pips still.

AUDUSD: Good support around 0.6630 after the extended retreat helped by the AUDJPY supply. I remain a rally seller as my preferred side/strategy. GBPAUD trading 1.8100-1.8250 now in the latest tight range as core pairs both retreat. NZDUSD capped into 0.6400 this time but holding of 0.6300 and a decent bounce. GBPNZD capping into 1.9200 now amid the softer GBP tones but some decent bids still holding 1.9000-50. USDCAD: Testing the decent 1.3620 support line again on the generall softe USD tone and firmer oil price. Expect more two-way business overall but a break lower here should target 1.3575-00.

Let's continue to be careful out there.

Interbank rates: 08.55 GMT

GBPUSD 1.2152

EURUSD 1.0627

EURGBP 0.8745

GBPEUR 1.1433

GBPJPY 160.54

GBPCAD 1.6560

GBPCHF 1.1243

GBPZAR 20.9800

GBPHKD 9.4648

USDJPY 132.15

EURJPY 140.40

EURCHF 0.9837

EURHKD 8.2944

AUDUSD 0.6690

NZDUSD 0.6360

USDCAD 1.3631

USDCHF 0.9256

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