European Open USDJPY surpasses 120 as BOJ promises to keep it simple

Asian indices:

• Australia’s ASX 200 Index is up 62.6 points (0.86%) and is currently trading at 7,341.10
• Japan’s Nikkei 225 index is up 364.69 points (1.36%) and is currently trading at 27,192.12
• Hong Kong’s Hang Seng Index is up 246.71 points (1.16%) and is currently trading at 21,468.05
• China’s A50 index is up 27.17 points (0.2%) and is currently trading at 13,752.62

UK and Europe:

• UK FTSE 100 futures are currently down -7.5 points (-0.1%), the spot market is currently valued at 7434.89
• Euro STOXX 50 futures are currently down -23 points (-0.6%), the spot market is currently valued at 3,858.80
• Germany’s DAX futures are currently down -73 points (-0.51%), the cash market is currently valued at 14,253.97

US Futures:

• DJI futures are currently down -53 points (-0.15%).
• S&P 500 futures are currently down -56.25 points (-0.39%).
• Nasdaq 100 futures are currently down -13.5 points (-0.3%).

Energy and financial stocks led Japanese equity markets higher, although the Hang Seng topped the rankings after Hong Kong announced it would ease lockdown restrictions next month. The futures markets for Europe and the US are currently trading lower as investors absorb recent hawkish comments from Jerome Powell and the prospect of a 50 basis point hike.

USD/JPY breaks above 120

The BOJ (Bank of Japan) will maintain its ultra-loose monetary policy amid continued fears that the cost inflation they are experiencing will hurt the economy. Separately, Japan is reportedly considering a ¥10 trillion stimulus package.

This has only widened yield differentials between US and Japanese government bonds, causing USD/JPY to break above 120 for the first time since February 2016. The Yen is generally weaker and commodity currencies (AUD, CAD and NZD) are up around 0.7-0.8% overnight. GBP/JPY hit a 5-month high.

The euro continues to move lower

The euro remains under pressure as disagreements between EU leaders over how to deal with a Russian oil import ban linger. Joe Biden claims that Russia is considering using chemical and biological weapons in Ukraine, citing Russia’s (false flag) claims that Kyiv currently has its own biological weapons. Earlier, Biden warned that Russia will pay a “heavy price” for using chemical weapons in Ukraine, although details of what the consequences of those consequences are are still speculated.

EURCAD hit our first downside target around the 1.3855 low but has since found support around the weekly S1 pivot. Next support is 1.3758 March low and a symmetric triangle breakout remains in play with a target around 1.3550.

EUR/USD has also broken below trend support and is now trading below 1.1000. Jerome Powell’s highly hawkish comments yesterday combined with the Ukraine crisis have continued to put pressure on the pair and we see its potential to drop back down to 1.0900.

FTSE 350: Market Internals

FTSE 350: 4177.9 (0.51%) 21 March 2022

• 121 (34.47%) stocks rose and 219 (62.39%) fell
• 3 stocks rose to new 52-week highs, 0 fell to new lows
• 34.47% of shares closed above their 200-day moving average
• 67.52% of shares closed above their 50-day moving average
• 19.37% of shares closed above their 20-day moving average

Top performers:

• +9.87% – Tullow Oil PLC (TLW.L)
• +8.08% – Antofagasta PLC (ANTO.L)
• +6.29% – Airtel Africa PLC (AAF.L)

Underperformers:

• -13.33% – Baltic Classifieds Group PLC (BCG.L)
• -9.09% – Helios Towers PLC (HTWS.L)
• -7.74% – Ocado Group PLC (OCDO.L)

WTI breaks above $112

Oil prices surged for a fourth day that saw the WTI futures contract trade just below $113 in the front month. The weekly API report comes out at 20:30 GMT, which could provide further direction, although supply concerns related to Russian oil bans are likely to be the main driver of sentiment this week.

Aluminum prices are higher overnight as Australia banned alumina exports to Russia. Copper is a bit lower today, but it appears to have followed stock market sentiment since China pledged more stimulus last week. Although the war in Ukraine remains a major support for metals and has arguably contributed to volatility in recent weeks.

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