BOJ Expands Asset Purchase Program: Reaction

Following the footsteps of Fed, Bank of Japan (BOJ) increased its asset-purchase warchest to 55 trillion yen from 45 trillion yen and kept lending facility at 25 trillion yen.

USD/JPY M15

Yen weaken as expected, but is still kept under H5 level 79.192. Also, it is important to note that USD/JPY did not manage to push above 79.1 immediately after the news, demonstrating the strength of resistance between 79.0 – 79.2.

Nikkei 225 H1

Nikkei 225 managed to push slightly above post QE3 high, and is currently trading above H4 levels. If we are using USD/JPY chart as reference, prices may be similarly seeking H5 levels before hitting resistance.

What can we expect moving from here?

With European markets and US markets yet to open, all eyes will be on traders in the 2 regions. Should risk assets continue to rally at both sessions open,  we could potentially see a recovery of risk appetite/risk on that has since tapered off a little since last Friday.

Should European markets and US markets display lackluster price actions, this will tell us that bullish sentiment could have dissipated and potential tops could be forming around QE3 price levels.