BOJ and ECB Spark Massive Moves, Latest Insights

A wild day of central bank decisions left traders breathless. The moves in the yen crosses were massive with EUR/JPY gaining 500 pips in the largest one day move since 2008. The market will get a breather with no major releases in the Asia-Pacific zone but the sequel is Friday's non-farm payrolls report. New Premium trades were added onto USDJPY and EURAUD. Both EURUSD hit targets, so did the short-end of last night's dual trade in OIL. The long has now been filled and in progress alongside both gold and silver. For full detail on Premium signals and charts, please see latest Premium Insights

The Bank of Japan decision to double the size of its balance sheet reverberated throughout the session and it left the market on edge for the ECB decision.

Rates were left unchanged by the ECB as expected but there was considerable speculation Draghi could foreshadow an imminent rate hike. As his press conference began he appeared to be heading in that direction, emphasizing downside risks.

But the payoff never came. Draghi said the ECB stands ready to act but said inflation risks were balanced. He also emphasized that the ECB can only do so much and that political action is needed.

The euro fell slightly below 1.2750 and then ripped more than a pip higher. A second leg of buying came after EUR/USD broke the 200-day moving average at 1.2889 and it culminated in a rally to 1.2950 – more than 2 full cents from the low.

The moves in the yen crosses were spectacular and left large, imposing patterns on all the yen charts. At some point there will be partial retracements but Kuroda has shown he can wield a bazooka as well as any central banker and that will leave yen longs frightened.

The lone items on the calendar are the BOJ monthly report and Japan's leading index. Neither is generally a market mover but the reverberations from the BOJ decision are surely to keep markets on edge. The Japanese 30-year bond yield fell 22 basis points to a paltry 1.30% yesterday and that will leave investors scrambling to find other places to put their money. The questions is: will it go into Japanese equities or overseas? There might be room for both.