Currency Pair Overview Ahead Of The Bank Of Japan

Overall, the dollar had a day of fresh air,after the currency had been sold everywhere and in any circumstances over the past week. The dollar’s appreciation halted the strong trend seen in the euro and swissy in the last few days. Essentially, this was the first time the majors rallied against the dollar, since the beginning of the sub-prime, back in July.

Ahead, the market has only one important release left this week, the Bank of Japan’s interest rate decision. The market expects the bank to cut 10 basis points, down to 0.20%, even though one week earlier, nobody would have said the BoJ would cut. Another important release today is the CPI read coming from Canada.

The Euro (EUR/USD) rebounded from the 200-day moving average yesterday, to close the day recording a 130 pips loss. With this negative close, the euro snapped an 8-day advance, in which the pair rose 1700 pips. The daily chart shows that the euro closed the day Thursday forming a doji-star, indicating market indecision. In the Asian session, the euro advanced 30 pips.

The Pound (GBP/USD) bounced from the 50-day moving average yesterday, and declined a strong number of pips. The pair was only able to bottom near the 20-day moving average, after it fell around 500 pips. In the Asian session, the pound rose 115 pips, up to the neutral pivot point (1.5475). The pound’s strong decline made the EUR/GBP touch the 0.95 area for the first time in history.

The GfK Consumer Confidence index score has increased two points to -33 this month, nineteen points lower than this time last year. This marginal improvement was caused by an improvement in the major purchase measure.

"The Consumer Confidence Index has improved again this month after the interest rate cut and the fall in petrol prices, but still continues to hover at near record lows," said Rachael Joy of the GfK NOP. "UK Consumers have become even less confident about the future economic situation but, among these historically low levels of confidence, there is perhaps a glimmer of hope: for the second month running”

The Aussie (AUD/USD) lacked the strength to break above the 0.7050 resistance level and closed the day 170 pips lower. The aussie was posting gains in the overnight session, but all seemed to have reversed during the U.S. open. The aussie’s decline was intensified by the strong selling in the commodity market, the country’s main exports.

The Cad (USD/CAD) was pulled higher by the strong decline in the crude’s market. The pair rose 150 pips, paring the declines seen on Wednesday, after oil tumbled to a four year low. Tonight, the pair fell 30 pips in the Asian session.

The Swissy (USD/CHF) had a very volatile day yesterday, something that happens very rarely for this pair. The swissy fell initially 330 pips in the overnight session, but gave everything back during the U.S. session and even gained some additional pips. At the end of the day, the pair formed a doji star, snapping a 6-day of declines. In the Asian session, the swissy fell 30 pips.

The Yen (Usd/Yen) gained 230 pips yesterday, helped by the Chairman of the Bank of Japan, which said the bank still could intervene in the currency market. This comes as the yen fell yesterday to a 13-year low against the dollar. Tonight, the markets expect the BoJ to cut the interest rate by 10 basis points, down to 0.20%.

The Japanese all industry activity index came in at negative 0.5 percent for the month of October when compared to the previous month. This is higher than what economists were forecasting, but a decrease from Augusts’ upwardly revised -0.1 percent.