Fireworks night didn t disappoint

It has been a very volatile session in Asia for the JPY and the Nikkei as we head towards the business end of the week for financial markets. USD/JPY continued to its move higher, breaking above 115 to make a fresh  seven-year highs above 115.50. The Nikkei traded above 17,000 but this all changed in a market move that saw extreme volatility as the Nikkei dropped 1.6% in minutes. This caused the JPY to strengthen some 110 points against USD in the same time period as traders in the region sighted extreme liquidity issues.

The AUD initially traded higher as the market digested the Australian jobs data. But the market soon lost interest as the unemployment rate came in as expected at 6.2%. The unemployment change was also close to the consensus reading of 20k at 24.1k.

Today will be all about the central banks, and in particular ECB President, Mario Draghi, following criticism earlier in the week from the usual unnamed ‘ECB sources’ who sighted that the target figure given by Mario of 1 trillion euro to expand the ECB balance sheet has put increasing pressure on the governing council. The BoE meeting is likely to be a non-event today as the market focus will now be next week’s quarterly inflation report, which is likely to dominate the near term direction for sterling. The consensus view is that despite the surprise action taken by the BoJ last Friday increasing the pressure on the ECB to take further stimulus measures, the governing council are likely to refrain from any action until a consensus majority is established within the council. This may never happen whilst Bundesbank governor Weidmann remains a staunch opposition to sovereign debt purchases. Today, I expect an unchanged policy decision from the ECB with a very dovish tone from the not-so-super Mario in the subsequent press conference.

EUR/USD

Supports  1.2440-1.2395-1.2350  | Resistance 1.2540-1.2585-1.2610

USD/JPY

Supports 114.00-113.85-113.15 | Resistance 115.50-116.00-117.25

GBP/USD

Supports 1.5855-1.5785-1.5725  | Resistance 1.6025-1.6065-1.6125