Summary:

• Japanese yen jumps higher as the BoJ decides to trim bond purchases in one of its regular operations
• USDJPY bounces off a descending trend line, room for declines seem to be limited though
• Asian shares higher in response to fresh records seen on Wall Street

The Japanese currency decisively stole the show overnight as it spiked immediately after the Bank of Japan chose to cut its bond purchases to some extent. The BoJ trimmed purchases of bonds dated in 10 to 25 years by 10 billion JPY compared to its previous operation to 190 billion JPY. The bank also reduced purchases of 25Y+ bonds by the same amount. Even as the move was just a minor tweak the Japan’s currency spiked quite substantially against the US dollar. As a result the JPY is currently gaining 0.4% being the strongest currency within the G10 basket. In turn the Japanese 10Y yield ended the day a bit higher but still far away 0.1%.

A jump seen in the JPY was sparked by some analysts arguing the bank began tapering its JGBs purchases, however one needs to keep in mind that the BoJ is still focused on keeping the 10Y yield around 0% via the yield curve control mechanism. Quite a substantial response of the JPY is a sign how much markets are sensitive to even subtle changes in monetary policy. It could reduce chances that the BoJ will decide to drop the annual 80 trillion yen bond-buying target any time soon or engage in fine tuning of its policy regarding the 10Y yield.

The USDJPY drifted lower after the BoJ cut slightly its JGBs purchases. The closest demand zone is localized just under 112 and it should be treated by bulls as their last resort. On the flip side, if the pair resumes its upward momentum buyers will have to deal with a descending trend line being the largest obstacle for them. Source: xStation5

In terms of macroeconomic readings we got building approvals from the Australian economy which came in well above forecasts. The November’s figure showed +11.7% mom while the market consensus was placed at -1.3% mom. In turn in a year over year basis there was a 17.1% increase against the median estimate placed just at 4.6%. It needs to underline that the huge rise was mainly driven by private dwellings houses which soared as much as 30.6% mom. Nevertheless the Australian currency remained quite unmoved being gently up on the day though.

Hang Seng (CHNComp on xStation5) managed to gain during today’s session following fresh highs registered on Wall Street yesterday. Source: xStation5

Finally let’s mention global stock markets. The two major indices on Wall Street (SP500 and NASDAQ) marked their fresh records on Monday which was enough to see the Asian counterparts higher. Despite the BoJ’s move the NIKKEI managed to close the day higher (0.57%). From a technical point of view the Hang Seng seems to be in a decent place to resume its uptrend. Notice that the price was able to stay above a support nearby 12100 points and therefore one may expect a resumption of the underlying trend.