Bank Of Japan Did Not Impress Markets.

The event of last week was the policy meeting of the Bank of Japan. Expectations were low, meaning most analysts had predicted no action from the BoJ. Causing initial surprise, the central bank announced expansion of its asset purchase program by JPY 10 trillion to JPY 55 trillion. In response, all the Yen pairs rallied, but that lasted only few hours as if markets digested the news and lost enthusiasm. After all, bigger purse does not guarantee more QE, at least not immediately. According to the release, the target for asset purchases for 2012 remains unchanged at JPY 45 trillion, while the objective for mid-2013 increased by JPY 5 trillion. To date quantitative easing by Japanese authorities did very little to weaken the Yen, especially versus the USD. Based on what happened last week, if the BoJ wants achieve measurable results, it will have to become as aggressive as the FED when it comes to money printing. Alternatively, a new round of direct interventions is another option, too.

Actions of the BoJ had some influence on my trade from last post, the short in CAD-JPY, although without changing its outcome. A brief weakness in the Yen created an uncomfortable bounce, but that was short lived. The price resumed its downward trajectory, falling to 79.57, easily meeting my target of 80.00. I am considering another sell under the new low and will make the decision in coming days. If it happens, the objective would be comparable to the previous trade, about 75 pips or so.

Another possible trade covered in the previous post did not work out. More to the point, it did not happen. I was looking for a trend reversal on the hourly chart of the AUD-NZD, with intention of buying it at 1.2745. The price kept falling, establishing a minor high at 1.2695, which could become a new long entry (or few pips above it, like 1.2705). In simpler terms, I am tracking minor highs with buy orders, still waiting for a reversal/rebound. The next one could form at around 1.2650, allowing for lower entry, but that is speculative for now.

The Euro pulled back to some degree, although it is not clear if this is a genuine reversal or a corrective move, typical following a strong rally. In case of the EUR-CAD that translated into a decline from 1.2798 to 1.2633. At this point, the hourly chart appears to be undecided. While it could form a bottom here, I am inclined to think the EUR-CAD will move lower. With a sell order at 1.2628, immediate target is around 1.2550. Meanwhile opening gaps could bring some short-term trading opportunities, if they develop. We will find out soon. Have a great trading week!

Mike K.

Source: http://www.istockanalyst.com/finance/story/6054492/bank-of-japan-did-not-impress-markets

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