RBA: Link To Listen To Governor Lowe

USD/JPY continued to find selling interest post the Asia close on moves above 129.00. The pair tracked lower through NY trade, in line with broader softer USD sentiment (ex EUR). However, we couldn't get sub 128.00 and track at 128.15/20 currently. Market focus rests squarely with the BoJ outcome today.

• Our full preview is here. Most speculation rests on whether there will be further tweaks to the YCC framework or a complete abandonment of the policy altogether.
• A status quo outcome from the BoJ may induce a kneejerk reaction move higher in USD/JPY but our sense is the market will still use this as an opportunity to reload shorts, as such an outcome is likely to be viewed as kicking the can down the down.
• Recent highs rest just above the 129.00 level, beyond that is the 130.00 figure level, while the 20-day EMA comes in at 131.72. On the downside YTD lows sit close to 127.20.
• USD/JPY overnight vol is at 48.60%, but we got to 54.35% during Tuesday's session, fresh intra-day highs back to 2008. 1 week vol has edged down a touch to 22.35%.
• Ahead of the BoJ meeting, core machinery orders print, while IP figures and capacity utilization print later.

AUD was one of the better G10 performers against the USD, but still underperformed NZD and GBP. AUDUSD trended higher during the northern hemisphere session after reaching a low of 0.693. It is now trading around 0.6989, just below the intraday high of 0.6997. DXY is up 0.2%.

• AUDUSD appears to be struggling to break through 0.7000 again and initial resistance lies at the January 16 high of 0.7019. The bullish trend remains in place. Key support is at 0.6688, the January 3 low.
• Aussie is 0.3% weaker against the kiwi at around 1.087. It is a bit stronger against the yen at 89.55. AUDEUR is up 0.8% to 0.6477 after a report suggested that the ECB is considering a slowdown in tightening. But AUDGBP is down to 0.5688.
• Equity markets were mixed with the S&P 500 down 0.2% and the NASDAQ up 0.1% and the Eurostoxx +0.4% but the FTSE -0.1%. The VIX finished at 19.4%. WTI oil prices rose 1.5% to around $81.00/bbl, buoyed by better-than-expected December Chinese data. Iron ore was also boosted by the data and is now back above $120 at $121.85. Copper was also stronger up 0.4%.
• There isn’t any data in Australia today with the focus of the week being on Thursday’s employment report.

NZD/USD prints at $0.6431, ~0.8% firmer yesterday, NZD was the strongest performer in G-10 space at the margins.

• The pair was pressured in the European session as a broad based bid in USD, support was found below $0.6370.
• NZD/USD rallied as the broad based move in USD reversed, extending gains on weaker than expected US Empire Manufacturing. NZD held gains, printing its highest level since mid December, and closed above the key level of $0.64.
• Whole Milk Powder average price rose to $3,218 a tonne up from $3,208 at the previous auction. The GDT Index fell ~0.1%.
• Bulls look to target the Dec high at $0.6514 after closing above $0.64. Bulls first target a break below 20-day EMA at $0.6345 to turn the tide.
• On the wires earlier Dec REINZ House Sales fell 39.0%, the prior reading was -36.1%.
• On the wires this morning we have Dec Card Spending MoM Retail (prior was 0.3%) and Total (prior was -0.4%).