BOJ Interest Rate Decision
The Bank of Japan (BOJ) maintained its interest rate at 0.25%. Despite previous indications of a potential rate hike, the yen's tepid response suggests that optimism around an imminent increase has faded. Just weeks ago, there were strong expectations for a rate hike, but the BOJ's recent dovish tone signals that they aren't in a hurry to make such a move. While I believe they may be better positioned to consider a hike next year, the latest decisions reflect a significant shift in market sentiment regarding immediate rate adjustments.
Market Response to BOJ Decisions
On Thursday, the Japanese yen lagged behind other major currencies, which largely outperformed their average daily ranges. The only exception was NZD/JPY, which remained within its 10-day average true range, as the New Zealand dollar experienced selling pressures due to a disappointing GDP report indicating a technical recession after two consecutive quarters of contraction.
- CHF/JPY emerged as the strongest pair against the yen, climbing 2% for its best performance in two years.
- GBP/JPY surged past the 2015 high, aligning with bullish market sentiments.
- USD/JPY reached a five-month high, showcasing robust gains over the past six weeks.
Bank of England Interest Rate Update
The Bank of England decided to keep interest rates steady at 4.75%, though the voting breakdown revealed a subtle shift in sentiment, with three members advocating for a rate cut compared to two. This slightly less dovish outlook put pressure on the pound, which struggled against the US dollar, bringing GBP/USD close to its November lows.
ASX 200 Futures Analysis
ASX futures have experienced a decline of approximately 5.4% since the December peak. However, bearish momentum appears to be softening as it approaches November's lows. The daily bullish RSI (2) is showing signs of bullish divergence within the oversold territory, while post-FOMC price movements have demonstrated challenges in sustaining further losses. The 1-hour RSI (14) is also reflecting a bullish divergence.
With the November low nearly in sight, I anticipate the market will likely attempt to breach this level early in the session. Nonetheless, I am cautious about a daily close below this mark, especially as US indices have maintained above their FOMC lows during this period known for positive market sentiment.
While significant gains may not materialize, I'm hopeful for a partial retracement from the losses experienced following the FOMC meeting.
This seasonal trend, characterized by indices traditionally performing well regardless of the prevailing economic situation, sets the stage for potential positive movement. Historical data indicates that the ASX 200 often sees favorable daily returns from December 19th to 30th.
Key Economic Events (AEDT)
- 10:30 – JP CPI
- 11:30 – AU Housing Credit
- 12:00 – CN Loan Prime Rate
- 13:00 – NZ Credit Card Spending
- 18:00 – UK Retail Sales
- 23:30 – FOMC Daly Speaks
- 00:30 – US PCE Inflation
