Not only is it a big day of earnings in Japan, but the BoJ meet in the afternoon, with BoJ governor Kuroda set to speak at 4:30pm AEST. The BoJ are not expected to ease further, however the market is expecting changes to its economic projections. Mr Kuroda has been fairly hawkish of late, suggesting the Japanese economy is responding well to its loose stance and is on track to meet the inflation goals that have been set. With this in mind, any dovish narrative that hints a monetary policy easing in the future should see the JPY weaken across the board.
Given the slight weakness of late in iron ore and the recent lower-than-forecast Australian Q1 CPI report, interest rate expectations have fallen. The swaps market is now pricing in eight basis points of hikes over the coming twelve months. At 11:30am we get March private credit figures, with economists expecting an increase of 4.5% on the year, however I can’t see data point having a large impact on markets. I like to sell the pair on moves to 0.9280 on the day.
There is a pronounced uptrend in EUR/JPY, hence I am focusing more on this pair than EUR/USD. Trend support drawn from the November 2013 low comes in at 141.09 and there is good validity as we have seen rejections off the trend in February and twice in April. After the weaker-than-forecast German inflation numbers (released overnight), with German EU harmonised coming in at 1.1% versus the 1.3% expected, there could be downside risks to tonight’s (19:00 AEDT) Eurozone ‘flash’ CPI figure. The market expects a rebound from 0.50% to 0.8%, so anything less than 0.7% (while surprising) will likely hit the EUR.
On the daily chart there seems to be good buyers on dips and this can be seen with long wicks seen, highlighting good buying pressure. I have chosen to close my short spot silver position from 1960 at market (spot now at 1945) for a profit of 0.7%, given the solid support seen. There is a massive night of event risk for all asset classes, but silver especially has the premise to be higher than most. In US trade we get the US ADP private payrolls (at 10:15pm AEDT), with economists expecting an increase to 210,000 jobs. We also get Q1 GDP and then the FOMC meeting at 4am. The Fed are widely expected to taper its QE program, however the market will be keen to see the language in the accompanying statement.