FTSE 100 Support 6714 6713 6693 6586
FTSE 100 Resistance 6738 6745 6764 6770 6855
Good morning. The 6720 long yesterday worked out well though the rise faltered at 6760, just shy of the 6770 shorting area so a good move closing the long at 6758. The market pretty much trod water for most of the day really, hovering around the 6730 area, and the 10 day Bianca channel is now even narrower – with resistance at 6770 and support at 6713 – going to break soon… and probably have a swift 100 point move as well. Overnight, the BOJ modestly increased purchases of exchange-traded funds, but maintained its base money target at 80 trillion yen ($775 billion) and the pace of purchases of other assets, including Japanese government bonds. Not as “stimulating” as expected so most Asian stocks subsequently fell.
US & Asia Overnight from Bloomberg
The yen climbed with gold after the Bank of Japan’s expansion of monetary stimulus fell short of some traders’ expectations. Japanese government bonds plunged, while most Asian stocks fell.
In one of his most-watched meetings as BOJ Governor, Haruhiko Kuroda expanded the central bank’s target for exchange-traded fund purchases, while keeping its government-bond buying budget and its policy interest rate unchanged. The yen strengthened 1.9 percent against the dollar, while JGB futures dropped the most since 2013. The Topix index fluctuated as the MSCI Asia Pacific excluding Japan Index fell 0.2 percent. Gold added 0.4 percent.
“The BOJ had a choice of about five boxes to tick today, but only chose one,” said Sean Callow, a senior foreign-exchange strategist at Westpac Banking Corp. in Sydney. “And buying more ETFs was as widely expected.”
A week of dramatic swings in the $5.3 trillion-a-day foreign exchange market is ending with a bang as traders digest the BOJ’s decision, upcoming results of bank stress tests in Europe and second-quarter economic growth figures in America. Investors will also be watching corporate earnings from Sony Corp. to Barclays Plc for further clues on how global monetary easing is filtering through to the economy.
Markets were volatile in the minutes leading up to the BOJ announcement, with swings in Nikkei 225 stock-index futures and the yen exceeding 3 percent and 1 percent, respectively. Overnight implied volatility for the dollar-yen — the world’s second-most traded currency pair — climbed 40 percentage points on Thursday to 53 percent, the highest level since 2008.
Thirty-two of 41 analysts in a Bloomberg survey had forecast that the BOJ would expand its record stimulus program — the highest percentage of respondents in the poll in more than three years.
Kuroda led his board in voting to expand an ETF program to 6 trillion yen ($58 billion) a year, the BOJ said in a statement in Tokyo Friday. In an unexpected development, Kuroda has ordered an assessment of the effectiveness of BOJ policy, to be undertaken at the next meeting, which is scheduled for September.
“The BOJ’s disappointment, which also follows the ECB and BOE’s recent decisions to hold off easing, may just cause markets to re-assess whether they had front-run things too much,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd. in Singapore.
The BOJ decision followed a slew of key economic indicators for June released Friday, showing household spending slumped while industrial production rose more than economists forecast. Consumer prices dropped for a fourth consecutive month, illustrating how far prices are from the central bank’s 2 percent inflation target. [Bloomberg]
FTSE 100 Outlook and Prediction
Its Friday after the BoJ announcement so could well be weird. Markets were disappointed with the stimulus, so we may well start to see some more bearish activity, despite the FTSE futures holding up around the 6730 area overnight. I am still thinking that we will see 6770 again though, and todays prediction is a bit of a repeat of yesterday, using the 10 day Bianca channel levels and also the 30min chart. This has a rising PRT channel and S1 and R1 levels tally with that 10 day channel. As mentioned above, once the 10 day channel does break then we will probably get a fairly swift 100 point move in the direction of the break so that is definitely worth trading. So far this week that channel has held well. There is a fair bit of news out today (see here) particularly from the US around 13:30 so be aware of that. Generally today I am thinking a bit of a repeat of yesterday though.