Market Afternoon Recap – November 19th

Key Notes for November 19th 

• BoJ Press Conference see’s inflation likely to dip lower before moving towards the 2% target
• BoJ keeps monetary policy on hold after last month’s surprise stimulus expansion
• BoE minutes reveal 7-2 votes for rate hike
• US Housing starts soft at 1.01mn vs. 1.03mn forecasts; m/m change -2.8%
• US building permits rises 1.08mn vs. 1.04mn forecasts; m/m change 4.8%

It was a day marked with focus on Central Banks from across the globe. The Bank of Japan’s press conference showed that the Japanese inflation could dip further before it gains back towards the 2% target rate of the BoJ. The Central bank put on hold its monetary policy after last month’s surprise move. The Yen continued to remain weak with most of the Yen crosses gaining across the board since yesterday’s late US trading session.

The Yen was however marked by choppy trading, largely driven by market speculation. While Shinzo Abe did dissolve the parliament calling for fresh elections and delaying the sales tax hike, a widely rumored stimulus expansion failed to materialize with the Yen strengthening before the BoJ’s press conference.

On the USDJPY, the 117.5 handle remains to be the key level to watch for. While it marks the target objective of the bullish flag pattern as highlighted in our daily technical analysis, failure to close above this level on an intra-day basis could see USDJPY decline towards the major support at 116.78 levels.

Bank of England’s monetary policy minutes showed that the vote count for interest rate hikes remained unchanged at 7 – 2 as widely expected. The British sterling however managed to rally on the fact that the minutes were considered hawkish after last week’s dovish inflation outlook from the BoE’s quarterly inflation report. Technically, the rally in GBPUSD is being seen as a retracement or a correction with the larger bearish trend still intact.

The EURUSD remained fairly supported, heading into the FOMC meeting minutes due later today. Upbeat ZEW economic sentiment and the modestly higher GDP data is being seen as the reason behind the push. Ahead of the FOMC meeting, the EURUSD will have to break above 1.255 handle to prepare ground for further gains to the upside, which could see the Euro rally to as far at 1.29 levels. Alternatively, a decline could see the 1.255 resistance being confirmed with the next support level at 1.246 levels.

Earlier in the day, ECB governing council member, Klass Knot doubted the effectiveness of QE in regards to fighting inflation. Eurozone bond yields were already low with the fact that the Eurozone sovereigns can already borrow at historically low rates, he commented, while stressing that he wasn’t ruling out QE but remains skeptical.

The US housing data came out mixed with building permits rising 4.8% on a monthly basis, while housing starts were soft, declining -2.8% on a monthly basis. The Greenback was fairly muted to the release going into the FOMC meeting minutes.

With EURUSD looking bullish on an intra-day basis and the USDJPY struggling near the 117.5 handle, it does put to question the FOMC’s meeting minutes scheduled for later today. While last month’s FOMC meeting did not follow through with any press conferences, the markets will be closely reading the minutes to gauge the language in the statement. However, on a broader perspective, markets expect to see a hawkish minutes, based on the general tone during last month’s policy review.