Gold and Silver Not Glittering Against the JPY

Disappointment, today as the Bank of Japan, failed to deliver its part of the “big bazooka” by further cutting rates or materially increasing the size or extending the timing of their QE programme. The only crumb that was thrown to the markets was an increase in the ETF buying programme and an increase in the USD funding facility to Japanese Corporates.

More surprisingly they have kept their timing in place for hitting their 2% inflation target in 2017. Rather interesting really when the Japan CPI figures came in at an asthmatic -0.4% this morning.

 *(JP) JAPAN JUN NATIONAL CPI Y/Y: -0.4% V -0.4%E; CPI EX FRESH FOOD (CORE) Y/Y: -0.5% (3-year low) V -0.4%E – CPI Ex Food and Energy (core-core) Y/Y: 0.4% (1-year low) v 0.5%e – Source TradeTheNews.com

Some of Governor Kuroda’s comments appear somewhat contradictory to the Bank of Japan decision.

BOJ GOV KURODA: WILL EXAMINE BOJ POLICY WITH QUESTION OF WHAT IS NECESSARY IN FUTURE TO MEET 2 PCT PRICE TARGET
BOJ GOV KURODA: WRONG TO THINK WE ARE ATTACHING LESS IMPORTANCE TO QUANTITATIVE EASING
source: Reuters

My take out to this result is that the BoJ is sending a signal that we are reaching the limits of monetary policy for now, and they wish to keep their powder dry. Rather, going forward, fiscal policy will have to do more of the heavy lifting. Tuesday cabinet meeting will take on more importance as the details of the Governments extra budget will be revealed. Critical to this will be the amount of new spending amongst the overall package estimated at Yen 28Tn (USD 265 bio).

USD/JPY price action since early this morning has been ugly, to say the least. With 100 point moves on vapours in extremely thin liquidity pre-Bank of Japan. USD/JPY dropped from 105.20 to 103.30 in a heartbeat early this morning before recovering to 104.60. Things weren’t much better post announcement, with USD/JPY dropping from the 105 area to 102.70 before bouncing to 103.50. Positioning appears to be very light now in JPY, and this has exacerbated the moves.

The ball is really in the Governments court now with any disappointment potentially exacerbating the downside pressure to USD/JPY. The daily chart is looking particularly heavy. I not that USD?JPY has now failed at the bottom of the daily Ichimoku cloud four times in the last eight days. (circled area) Resistance intra-day should lie around 104.00 now with support at previous daily lows around 102.40.

XAUJPY and XAGJPY

Neither chart looks rosy running into the session end. Both have made double tops over the last three days and are closing on their lows for the Asia session.

I note that on the OANDA Long/Short Position Ratios XAGUSD and XAUUSD both remain in a top four of longest positioning. It will be important to watch the New York close in both crosses tonight for further evidence of downside pressure on Monday.

XAU/JPY Resistance 141276 and 138100 support. A daily close below here, in particular, sets up a test of 137000 the 100-day moving average.

XAG/JPY Resistance is 2152 triple top and 2055 support.

Nikkei

The Nikkei was sold hard today down -1.8% at one stage before staging a rapid recovery into the session close. It looks like Kuroda’s ETF comments have given late support to the index.

BOJ GOV KURODA:
INCREASE IN ETF PURCHASES NOT AIMED AT SUPPORTING SHARE PRICES
BELIEVE ETF PURCHASES WON’T DISTORT MARKET FUNCTIONING
source: Reuters

The daily chart shows a spike low to the base of the daily cloud at 16090 before the Kuroda led bounce to 16470. This is the 100-day moving average and has been low in three of the last four sessions. A daily close below not being a good sign.

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