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Asian stocks traded mixed after a slow start, with limited news and no significant impact from the BoJ's actions. The JPY was affected as the BoJ kept its rate and YCC unchanged, and acknowledged the recent cooling in inflation.BoJ Governor Ueda says that any policy change could involve surprise and it's difficult to present a clear picture on policy exit. He also mentions that the market should be able to forecast BoJ's policy shift to some extent. When it comes to exiting from NIRP, BoJ does not have a detailed picture of the order of policies to be taken. Additionally, accommodative conditions would be maintained for an unspecified period after lifting of negative rates. Fed's Daly mentioned the possibility of lowering interest rates in 2024 due to improved inflation. The US and its allies agreed to a Red Sea naval task force, while Yemen Houthi officials stated readiness to confront any potential US-led coalition in the Red Sea. 

Looking forward to the day ahead, there is not much economic data docket scheduled to be released in both the United States and Europe. The most important data point will be the last report on inflation in the Eurozone for November. However, investors are expected to focus on statements made by various central bank officials, as their comments are likely to attract considerable interest from the market. Chicago Fed President Austan Goolsbee and ECB dove Yannis Stournaras joined other central bank officials in pushing back against market expectations for a spring rate cut. Goolsbee will clarify his stance in a live interview on Tuesday, while Atlanta Fed President Raphael Bostic is also scheduled to speak about the U.S. economy at a separate event.
 

FX Positioning & Sentiment 

USD/JPY option premiums decreased as the Bank of Japan kept its policy on hold and dampened expectations for a January policy move. This led to higher USD/JPY and a significant drop in FX option implied volatility. The implied volatility premiums for JPY calls versus puts also decreased, with 1-month 25 delta option risk reversals dropping from 1.9 to 1.35. The impact of the BoJ decision will be seen in the 1-month expiry from Friday.
 

CFTC Data

Net speculative positions in the futures market for various currencies as of Tuesday are as follows:

- Long positions for the US dollar decreased to 147,327 contracts from 152,360 the previous week

- Short positions for the Japanese yen decreased to 81,131 from 104,956

- Short positions for the Australian dollar decreased to 52,340 from 57,681

- Long positions for the British pound increased to 21,581 from 11,665

- Short positions for the Swiss franc decreased to 14,474 from 17,852
 

FX Options Expiries For 10am New York Cut 

(1BLN+ represent larger expiries, more magnetic when trading within daily ATR)

• EUR/USD: 1.0870-80 (1.7BLN), 1.0900-05 (862M), 1.0950 (441M), 1.1000 (456M)
• GBP/USD: 1.2435 (330M), 1.2750 (360M)
• AUD/USD: 0.6600 (400M), 0.6720 (492M)
• NZD/USD: 0.6090-0.6105 (688M)
• USD/JPY: 143.25 (519M), 144.50 (707M)
   

Overnight Newswire Updates of Note

• BoJ Stands Pat Amid Expectations For Policy Normalisation
• Japan MoF To Bring Forward Plan To Cut 20-Yr Bonds, According To Sources
• Japan To Draft Budget For FY2024 Of More Than JPY110 Tln
• RBA Considered Interest-Rate Hike, Saw Pause Case As Stronger
• Fed’s Daly: Rate Cuts Could Be Needed Next Year To Prevent Over-Tightening
• BoC’s Macklem Sees C.Bank Cutting Overnight Rate Sometime In 2024
• Senior Tories Pile Pressure On UK PM To Back Immediate Gaza Ceasefire
• Earthquake In North-West China Kills At Least 111
• Volcano Erupts In Iceland After Thousands Evacuated From Town
• SEC Delays Several Ethereum ETFs, Pushing Final Decision To May
• Apple Plans Rescue For $17 Bln Watch Business In Face Of Ban
• Tesla To Raise Pay For Hourly Nevada Gigafactory Workers In January
• Google To Pay $700 Mln In Play Store Settlement
• Icahn Is Ready To Launch A Fight To Control Illumina’s Board

(Sourced from Bloomberg, Reuters and other reliable financial news outlets)
 

Technical & Trade Views

SP500 Bias: Bullish Above Bearish Below 4675

• Below 4600 opens 4560
• Primary support 4600
• Primary objective is 4770
• 20 Day VWAP bullish, 5 Day VWAP bullish

(Click on image to enlarge)

EURUSD Bias: Bullish Above Bearish Below 1.09

• Below 1.0840 opens 1.0780
• Primary support 1.0650
• Primary objective is 1.1050
• 20 Day VWAP bullish, 5 Day VWAP bullish

(Click on image to enlarge)

GBPUSD Bias: Bullish Above Bearish Below 1.2690

• Below 1.2650 opens 1.2550
• Primary support  is 1.2185
• Primary objective 1.28
• 20 Day VWAP bullish , 5 Day VWAP bearish

(Click on image to enlarge)

USDJPY Bias: Bullish Above Bearish Below 145.50

• Above 145.50 opens 146.60
• Primary resistance 146.50
• Primary objective is 140
• 20 Day VWAP bearish, 5 Day VWAP bullish

(Click on image to enlarge)

AUDUSD Bias: Bullish Above Bearish Below .6660

• Below .6660 opens .6620
• Primary support .6525
• Primary objective is .6775
• 20 Day VWAP bullish, 5 Day VWAP bullish

(Click on image to enlarge)

BTCUSD Bias: Bullish Above Bearish below 42500

• Below 40000 opens 38500
• Primary support  is 36800
• Primary objective is 46000
• 20 Day VWAP bullish, 5 Day VWAP bearish

(Click on image to enlarge)

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