European Open: USD/JPY tops 120 as BOJ vows to keep it easy

Asian Indices:

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

UK and Europe:

• UK's FTSE 100 futures are currently down -7.5 points (-0.1%), the cash market is currently estimated to open at 7,434.89
• Euro STOXX 50 futures are currently down -23 points (-0.6%), the cash market is currently estimated to open at 3,858.80
• Germany's DAX futures are currently down -73 points (-0.51%), the cash market is currently estimated to open 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 shares led Japan’s share markets higher, although the Hang Seng was the top of the leader board following Hong Kong’s announcement they will ease lockdown restrictions next month. Futures markets for Europe and US are currently trading lower as investors absorb the latest hawkish comments from Jerome Powell and the prospects of 50 bps hikes.

USD/JPY breaks above 120

The BOJ (Bank of Japan) are to maintain their ultra-loose monetary policy as they remain concerned that the cost-push inflation they’re experiencing will hurt the economy. Separately, Japan is reported to be considering a ¥10 trillion fiscal stimulus package.

This has only widened the yield differentials between US and Japan’s government bonds and seen USD/JPY break above 120 for the first time since February 2016. The yen is broadly weaker and commodity currencies (AUD, CAD and NZD) have risen around 0.7-0.8% overnight. GBP/JPY reached a 5-month high.

Euro continues to move lower

The euro remains under pressure as the disagreements among EU leaders of how to handle a Russian oil-import ban continues. Joe Biden claims that Russia is considering the use of chemical and biological weapons in Ukraine, citing Russia’s (false flag) claims that Kyiv currently has biological weapons of their own. Previously Biden has warned that Russia will pay a ‘severe price’ if it uses chemical weapons in Ukraine, although details of what those consequences remain up for speculation.

EUR/CAD has reached our first downside target around the 1.3855 low but since found support around the weekly S1 pivot. Next support sits at the March low of 1.3758, and a symmetrical triangle breakout remains in play wit a target around 1.3550.

EUR/USD has also broken beneath trend support and now trades below 1.1000. The extremely hawkish comments from Jerome Powell yesterday alongside the Ukraine crisis has kept pressure on the pair and we see its potential to fall back down to 1.0900.

FTSE 350: Market Internals

FTSE 350: 4177.9 (0.51%) 21 March 2022

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

Outperformers:

• + 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 rose for a fourth day which saw the front-month WTI futures contract trade just shy of $113. The weekly API report is at 20:30 GMT which could provide further direction, although supply concerns surrounding any Russian oil bans are likely to be the key driver for sentiment this week.

Aluminium prices are higher overnight as Australia has banned exports of Alumina to Russia. Copper is a touch lower today, but it has seemingly tracked equity market sentiment since China’s pledged to provide more stimulus last week. Although the war in Ukraine remains a key pillar of support for metals and has arguably contributed to the baulk of volatility in recent weeks.

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