BoJ expectations are high with month end rebalancing flows likely to dominate

The JPY is the highlight from the Asian session as the remaining currency pairs in G10 space consolidate with comments from Cypriot finance minister Sarris that Laika Bank depositors could face haircuts of 80% with them having to wait a possible seven years before receiving any sort of a return on their savings as he went on to single out Germany, France and Greece in scathing comments with regards to the bailout negotiations.

Expectations are increasing for aggressive measures to be taken by the BoJ in the new regimes first policy meeting next week which for me is shaping up to be a classic buy the rumour sell the fact scenario with PM Abe calling for decisive action from the BoJ with media reports suggesting that they will look to start open ended asset purchases rather than using a 2014 timetable. BoJ deputy governor Iwata then said the 2% inflation target was impossible to achieve in two years and that five years may even be difficult.

This morning we get the release of the UK GDP and European consumer and industrial confidence with the US session bringing us CPI and new home sales data. We do have an Italian auction at 10am this morning.

We may start seeing the end of month rebalancing flows in the market today so if you see moves in FX space that simply don’t make sense then this maybe the likely catalyst.

Just a quick reminder that FX markets will be open as usual this Friday and Monday despite the holidays although liquidity will be at a premium.

EUR/USD

Supports 1.2800-1.2720-1.2660 | Resistance 1.2870-1.2940-1.3000

USD/JPY

Supports 93.85-93.50-92.80 | Resistance 95.00-95.55-96.15

GBP/USD

Supports 1.5130-1.5100-1.5025 | Resistance 1.5180-1.5265-1.5310