Image Source: Pixabay
 

The Bank of Japan's surprise announcement regarding a modification in its yield curve control policy, by widening its 10-year target to a plus or minus 0.5% versus its prior plus or minus 0.25%, has left markets grappling with the implications as the global anchor of rates is finally lifted, market participants believe that this is likely the first salvo in a significant regime shift that will unfold in 2023, this belief is contrary to the BoJ's official stance but nevertheless as is often the case once markets sense weakness or a shift in policy stance they will seek to test the position, with some major hedge funds already openly discussing plans to build positions in the Japanese Yen to take advantage of the potential for future announcements, given the sizeable moves already witnessed in favored carry trade positions in the likes of AUDJPY and NZDJPY which have already seen reversals of just under 5%. 

The BoJ move had initially pressured global risk sentiment with equity markets responding negatively to the last bastion of easy monetary policy seemingly giving way, however, a reversal in sentiment developed during yesterday's European and US sessions as dwindling liquidity and positive comments from FEDEX sparked the fuse for a short covering rally, with the benchmark SP500 snapping a four-day losing streak, this reversal in risk sentiment has carried into Asian trade overnight, with most Asian markets posting positive returns on the day, even the Nikkei managed to stabilize losses showing only marginal decline on the day. European markets are set to open with a positive tone this morning, investors will be hoping for no further 'tape bombs' for the remainder of the week as holiday-thinned trading conditions start to set in and investors hope for a Santa rally, the Scrooge's amongst market participants are starting to opine on what was going on behind the scenes at the BoJ that meant they needed to make this historical policy announcement the week before Christmas?
 

Overnight Headlines

• US Target China Potential Chip Star With New Restrictions

• US Hopes To See China Defeat Current Covid-19 Outbreak

• US Senate Advance $1.66 Trillion Government-Funding Bill

• Beijing Braces For Cases Surge, World Watches In Concern

• Japan Warns Of Covid Situation, Cuts Factory Output View

• Goldman: BoJ Could Remove Negative Interest Rates Next

• UK Business Confidence Sees Best Rebound Since April 21

• Zelenskiy Plans To Address Congress In-Person Wednesday

• Oil Holds Two-Day Gain On Stockpile Decline, Supply Risks

• TC Energy Delays Full Keystone Pipeline Restart Next Week

• FedEx Profit Top As Higher Prices Offset Shipments Decline

• Nike Beats Estimates As Boosted By Discounts, Promotions
   

FX Options Expiring 10am New York Cut

• EUR/USD: 1.0400-10 (890M), 1.0500 (272M), 1.0700 (258M)

• USD/CHF: 0.9300 (1.0BLN). EUR/CHF: 0.9800 (274M)

• AUD/USD: 0.6655 (207M), 0.6900 (867M)

• USD/CAD: 1.3485 (250M)
   

Technical & Trade Views

SP500 Bias: Bullish Above Bearish Below 3900

• Primary support is 3900

• Primary downside objective is 3700

• Above 3950 opens a test of 4000

• 20 Day VWAP bearish, 5 Day VWAP bearish

(Click on image to enlarge)

EURUSD Bias: Bullish Above Bearish below 1.0650

• Primary resistance is 1.0650

• Primary downside objective is 1.0450

• Above 1.0680 opens a test of 1.0735

• 20 Day VWAP bullish, 5 Day VWAP bullish

(Click on image to enlarge)

GBPUSD Bias: Bullish Above Bearish below 1.2250

• Primary resistance is 1.2250

• Primary downside objective 1.20

• Above 1.2275 opens a test of 1.2340

• 20 Day VWAP bearish, 5 Day VWAP bearish

(Click on image to enlarge)

USDJPY Bias: Bullish above Bearish Below 132.50

• Primary resistance is 132.50

• Primary downside objective is 130

• Above 133 opens a test of 133.60

• 20 Day VWAP bearish, 5 Day VWAP bearish

(Click on image to enlarge)

AUDUSD Bias: Bullish Above Bearish below .6740

• Primary resistance is .6740

• Primary downside objective is .6535

• Above .6775 opens a test of .6890

• 20 Day VWAP bearish, 5 Day VWAP bearish

(Click on image to enlarge)

BTCUSD Bias: Intraday Bullish Above Bearish below 16200

• Intraday 16200 is primary support

• Primary upside objective is 17200

• Failure at 16000 opens a test of 15500

• 20 Day VWAP bearish, 5 Day VWAP bearish

(Click on image to enlarge)