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BoJ maintains status quo, BoE minutes, UK jobs, BoC on the wire

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As expected, the BoJ kept its policy unchanged, cut its core inflation forecast down from 1.7% to 1.0% for fiscal year 2015 and expanded its loan programs. While the BoJ’s inflation target is at risk, a vast majority understands that lower oil prices are positive for the economic recovery, despite deviation from the inflation target. JPY crosses traded sluggish in Tokyo alongside with Nikkei stocks (-0.49%). USDJPY legged down to 117.30. Offers remain solid above the daily Ichimoku cloud top (118.54) and 50/21 dma (118.68/94 respectively). Key support stands at 115.50/57 (Fibonacci 50% on Oct-Dec rally / December low). EURJPY consolidates between Fibonacci base and 23.6% on December - January sell-off (134.71/138.27). The broad EUR-negative sentiment is still favorable for top selling strategies. Resistance is seen at descending conversion line (138.04).

In New Zealand, the CPI decelerated 0.2% in the 4Q, pulling the CPI y/y down to 0.8% from 1.0% previously. NZDUSD trades ranged in slight negative trending 0.76/0.80 range for the past four months. The short-term technicals turn negative suggesting a move toward 0.7548 (Oct-Jan downtrend base). esistance presumed at 21/50-dma (0.7760/76). Option barriers trail below 0.7685 for today expiry.

EUR/USD traded in the tight range of 1.1542/1.1588 in Asia. Trend and momentum indicators are comfortably negative before the ECB verdict due tomorrow. We remain seller on rallies. Decent option barriers trail below 1.1700/25 for today expiry, light vanilla calls are seen at 1.1600/40. EURGBP holds ground above 0.76 with negative bias before the UK jobs and BoE minutes. A break below 0.76 should fast track a move toward 0.75 and below (beginning of 2008 levels). Option barriers are solid at 0.76/0.75 through the week.

The Cable remains supported at September-January downtrend base 1.5031. The MACD is at the zeroline as the event/data risk remains high in the UK today. Market expects good labor data in November/December print with improvement in unemployment rate but more importantly a significant progress in weekly earnings from 1.6% to 1.9% on 3-months to November. In addition, the BoE releases meeting minutes and is expected to have kept its balanced tone given the persisting risks in the Euro-area and gloomy global growth outlook. The disinflationary pressures mostly due to lower oil prices certainly gives room to the BoE before rushing toward the policy normalization. GBPUSD should gain fresh direction today. Technically, a daily close above 1.5096 suggests short-term bullish attempt, while failure to break above 1.5269/67 (Jan 14/15th highs respectively) should suggest renewed pressures toward 1.50 support. Decent vanilla puts trail below 1.5055 and should weigh on the Cable if trapped below this level.

USD/CAD rallied yesterday through European and Canadian sessions. The renewed selling pressures on oil (WTI lost above 4% on session) pushed the pair to 1.2115. The BoC meets today and is expected to maintain the status quo. The accompanying statement however is expected to remain dovish given the ongoing squeeze in oil markets. Trend and momentum indicators are comfortably bullish, suggesting further advance toward Fibonacci 76.4% level of 1.2205. Option related bids trail above 1.1975 for today expiry and should help reinforcing ground above 1.20. The key mid-run technical resistance stands at 1.2734 (2005 high), then 1.3065 (2009 high).

Today, the BoE releases minutes and the BoC gives verdict.

The economic calendar: Swiss December M3 Money Supply y/y, UK December Claimant Count Rate and Jobless Claims Change, UK November Unemployment Rate & Weekly Earnings 3m/y/y, Credit Suisse’s ZEW Expectations in Switzerland for January, Canadian November Wholesale Trade Sales m/m, US December housing Starts and Building Permits m/m.

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