Tag: BoJ

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Forex Market Analysis

Dolar Index closes bearish helped by mixed CPI data

Hot Topics:

Dolar Index closes bearish helped by mixed CPI data.
EUR-USD is losing momentum.
Manufacturing Production (YoY) falls, and pound closes slightly upward.
BoJ – Kuroda keeps the promise

Hot Topics:

Dolar Index closes bearish helped by mixed CPI data.
EUR-USD is losing momentum.
Manufacturing Production (YoY) falls, and pound closes slightly upward.
BoJ – Kuroda keeps the promise

Hot Topics:

  • Dolar Index closes bearish helped by mixed CPI data.
  • EUR-USD is losing momentum.
  • Manufacturing Production (YoY) falls, and pound closes slightly upward.
  • BoJ – Kuroda keeps the promise of monetary policy.
  • Crude Oil climbs to the highest level since 2014.

Dolar Index closes bearish helped by mixed CPI data.

The index of the greenback yesterday closed down 0.04%, finding support at level 89.03 weighed down by mixed inflation data. On the one hand, Core CPI (YoY) rose to 2.1% in March from 1.8% registered in February. On the other side, the Consumer Price Index CPI (MoM) fell to -0.1% in March, while in February it recorded an advance of 0.2%. We continue to observe the lateral range in which the price is with a bearish bias. (Click on the chart for full resolution).


 

EUR-USD is losing momentum.

The pair of the single currency is losing momentum, in the fourth consecutive trading session, the euro advanced 0.10% finding resistance at 1.2395. In an interview with Reuters, the ECB lawmaker Ardo Hansson said that the ECB “needs to be patient and eliminate its stimulus very gradually.”

Although the ECB has kept the interest rate at low levels and has maintained its policy of buying bonds, lawmakers are debating that it is time to start cutting this policy. ECB legislator Ewald Nowotny, meanwhile, said he would have “no problem” in raising the deposit rate from -0.4% to -0.2% as a means to normalise monetary policy.

In this macroeconomic context, the euro is reaching a key area in the range 1.2412 – 1.245. Should not exceed the level 1.2476, the pair could make a new bearish leg. In the long term, we still have our eyes on 1.26 as the end zone of the EUR / USD bullish cycle.

Manufacturing Production (YoY) falls, and pound closes slightly upward.

Manufacturing Production (YoY) fell to 2.5% in February well below the consensus that estimated an advance of 3.3%. The sector that was most affected was the construction sector with a decline of 1.6% in February. The National Statistics Office attributes to a large extent these low figures to the effect of severe weather.

On the technical side, we are observing a possible corrective process that could begin to be developed from area 1.42 – 1.425 with a potential level of invalidation in over 1.4345 coinciding with the highest level of the year.

 

BoJ – Kuroda keeps the promise of monetary policy.

The Governor of the Bank of Japan, Haruhiko Kuroda, reiterated his optimistic view on the expansion of Japan’s economy, affirming that “With the improvement of the product gap and the medium to long-term inflation expectations observed, we expect that inflation will accelerate as a trend and go to 2 percent. ”

On a technical level, on the one hand, the USD-JPY is still in a limited lateral range between 106.64 and 107.49, the predominant bias is bullish and increases its probability of strength as it closes above 108. The level The invalidation of the bullish sequence is 105.66.

On the other hand, by a positive correlation concerning USDJPY, we see in the Nikkei 225 Index within a long-term bearish pattern developing an ascending diagonal formation, which in case of exceeding 21,957 could lead to exceeding 22,500 pts.

 

Crude Oil climbs to the highest level since 2014.

First, it was the turn of the Brent oil; now it is the turn of the Crude oil that has climbed to the highest levels since 2014, reaching 67.36 US $ / Barrel, while the Brent oil climbed to new highs reaching $72.69.

For the Brent Oil, although the trend is bullish, the closest resistance is $72.91, while the level of invalidation of the bullish cycle is below $67.

As with the Brent Oil, the Crude Oil is in a free climb up to $ 70.7 as long as it remains above the $64 level.

On the opposite side, by inverse correlation, the Loonie remains in free fall with a target at the base of the bullish channel, the impact zone could be between 1.2456 to 1.235.

 

 

 

 

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Forex Educational Library

Monetary Policy Statements of Bank of Japan 2017

 

Category: Fundamental Analysis, Intermediate, Currencies, economic cycles, Monetary Policy, Economy, Macroeconomics, Central Banks.

Key Words: Central Banks, Monetary Policy, Bank of Japan.

Tags:  Macroeconomy, BoJ, Monetary policy, 2017.

At the January 2016 meeting, the Central Bank of Japan introduced negative interest rates, setting the reference rate at 0.1%. This negative rate meant that the central bank would charge commercial banks for some reserves deposited in Japan’s central financial institution. The measure was designed to encourage commercial banks to use their reserves to increase the supply of loans to consumers and investors in Japan, to reactivate the economy and overcome the deflation that the country was experiencing at that time.

This negative rate would not apply directly to the accounts that customers had with commercial banks so as not to affect the purchasing power of individuals or companies. It was not a measure taken impulsively since the Bank of Japan had been analysing what measures could boost the behaviour of inflation for several years.

The decision was made by the board of the bank in a split decision of 5 votes in favour of the measure, against four votes who did not agree to establish negative rates. In addition, the report issued summarising the meeting, stipulated that if it was necessary to delve into the negative rates territory, this measure would be only be implemented until the bank achieved its 2% goal.

This measure of establishing negative rates has not been common for the central banks of the world’s leading economies since there is no consensus on the possible effects of negative rates. A problem that had lasted for quite some time in Japan was the decline in the prices of goods and services so that consumers restricted their spending due to their expectations of prices in the future.

At the press conference, the governor of the Bank of Japan, Haruhiko Kuroda indicated that deflation coupled with a global economic slowdown led to an unprecedented policy for Japan. For many analysts, the decision to adopt negative rates was surprising, and it was not known how much this could influence the short and medium-term inflation rate.

The consensus for many analysts was that the Japanese economy did not grow at higher rates as well as inflation, not because of low supply of credits but because companies had pessimistic expectations about the future of the economy, so they preferred to postpone their investment decisions. Therefore, they hoped that the outlook would not change even with negative interest rates.

Specifically, the bank adopted a three-tier system in which the balance that commercial banks held in the central bank would be divided into three levels:

  • Balances with a positive interest rate
  • Balances with zero interest rate
  • Balances with a negative interest rate

This multi-level system in the balances was intended to prevent an excessive decrease in the income of financial institutions derived from the implementation of negative interest rates.

As for the guidelines for money market operations, the bank decided in a vote of 8 to 1 in favour of conducting operations in the open market until the monetary base was increased annually by 80 trillion yen. The bank decided to make purchases of Japanese Government Bonds (JGB) so that the amount in circulation would increase its annual rate of around 80 trillion yen.

By early 2017, the bank confirmed that the interest rate in the short term would remain at -0.1% and for the long term it would be 0%, so the bank decided to continue buying Japanese Government Bonds to maintain the yields of the bonds at 0%. World economic growth was moderate, but the negative performance was for the emerging economies which remained lagging behind the growth of the developed economies.

The bank especially highlighted the US economy, which showed great strength in almost all its variables, ranging from household spending to exports to the labour market. Inflation was perhaps the only variable that had not shown the strength of other economic variables but was close to the objective of the FED of 2%.

Japanese exports improved, mainly by the automotive sector. Private consumption was expected to have a positive performance in 2017 due to a good performance of the labour market, and effects on wealth, given the growth of the stock index in Japan and the main economies of the world. Real estate investment also showed positive signs since the end of 2016.

Given these positive signs, the bank expected a moderate expansion of the economy in 2017 given a rise in domestic demand for goods and services, in addition to better global growth and the depreciation of the yen, which would continue to boost exports.

The committee recognised that there was a lack of strength for the inflation rate to be at 2%, so it was important for the bank to continue with its guidelines and its operations in the market in order to continue channeling inflation towards the objective set by the bank’s mandates. The committee cleared doubts about its increase in long-term rates given the rate hike that the FED carried out, being very clear that its monetary policy decisions would only be based on local inflation conditions and not on decisions of other central banks.

At the mid-year meeting in 2017, the bank decided to keep the negative interest rate of -0.1% in a vote of 7 to 2. In order to maintain the long-term interest rate at 0%, the bank decided to buy JGB at the same rate as it had already done by increasing its holdings by 80 trillion yen.

By mid-2017 the Japanese economy had returned to a moderate expansion, with a slight increase in exports as well as fixed investment in businesses. Private consumption still did not show positive signs despite a better outlook in the labour market with wages rising slightly. In terms of the consumer price index, its annual measurement was close to 0%, so the bank was far from its annual growth goal, but expectations were positive because they expected an upward trend of this indicator.

The bank said it would continue with the Quantitative and Qualitative Monetary Easing (QQE) program until inflation rises above 2% in a stable manner that would allow for a path of economic growth that is larger than expected until mid-2017.

At in the October 2017 meeting, the bank committee decided with a vote of 8 to 1 to keep the short-term interest rate at -0.1%. For the long-term interest rate, the Bank of Japan continued acquiring JGBs to keep the interest rate at 0% for the long term. In the reports, it was indicated that the vote was not unanimous because a member of the board needed more encouragement from the bank to reach the goal of 2% as soon as possible.

In the meeting held in October 2017, the bank continued with its monetary policy of negative interest rate established at -0.1%. Yields on 10-year Japanese government bonds were still zero given the intervention of the central bank. The Nikkei 225 index rose considerably during 2017 given high expectations in the corporate results of Japanese companies.

As for the yen, it depreciated against the dollar during the year due to the interest rate differential between both central banks. Regarding its parity with the euro, it did not fluctuate significantly during the year.

As in the January report, the performance of the global economy remained positive, especially in the United States, which maintained a robust growth rate with good employment rates and good dynamics in its domestic markets.

In Japan, the economy grew at moderate rates with good dynamics in the export sector that was positively boosted by world growth. Fixed investment in businesses showed signs of moderate growth mainly due to an improvement in corporate revenues, better financial conditions and a better expectation of economic growth in the following quarters.

The unemployment rate has remained at low levels between 2.5% and 3%, which has encouraged greater private and household spending. The behaviour of real estate at the end of 2017 showed flat signs and the industry showed a growing trend. Regarding inflation, the Consumer Price Index (CPI) for the main goods minus food showed figures between 0.5% and 1%, as shown in the following graph.

Graph 76.CPI Inflation Japan 2017.Retrieved 26th February 2017, from http://www.inflation.eu/inflation-rates/japan/historic-inflation/cpi-inflation-japan-2017.aspx

Although it is still not close to 2%, the behaviour of inflation has improved, and the bank’s expectations were that in the medium and long-term, inflation would be located at the bank’s target rate. It was clear to all board members that the engine of year-round growth was exports that benefited from a better global juncture.

If you compare the projections that the bank had in July and November, the projected inflation rate of prices decreased in November and was due to more pessimistic expectations about price growth and a reduction in mobile telephony, but the medium and long-term rates remained without modifications. For some members, there was still a long way to reach the goal of 2% due to an excess supply of capital and a labour market that still needed to be narrower, so that wage increases would be stronger.

In conclusion, given the behaviour of the economy during 2017, the committee determined that the economy needed monitoring continuously to achieve its goals in the coming years. The objective of inflation was met, but the board was satisfied with the macroeconomic development of Japan. For most of the members, it was clear that the monetary easing program should continue to support the different measures of inflation so that the expectations of businesses and households would change and spend more, boosting wages and prices.

There was also the concern that other banks were ending their monetary easing programs and in some cases, interest rates were rising, so this could put pressure on the yen’s exchange against other currencies. The monetary relaxation program had begun later in Japan, so the normalisation of its monetary policy could also take longer. Given these statements, it was easy to understand why the executive board still did not change the negative interest rates and its purchase of Japanese government bonds.

©Forex.Academy

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Forex Educational Library

Japan’s Economic Outlook

Japan’s economic outlook

Category: Fundamental analysis, Intermediate, Currencies, economic cycles, Monetary Policy, Economy, Macroeconomics, Central Banks.

Key Words: Central Banks, Monetary Policy, Bank of Japan, Projections.

At each meeting of the bank’s board, a review is made of the state of the Japanese economy, the projections for the current year and the next two years, and the risks to which the economy is exposed both internally and externally.

In the April 2017 report, the board concluded that the economy would continue its positive trend growing above the potential stipulated by the bank, due to better internal financial conditions, some government stimulus and greater global economic growth. The bank was explicit that the expected growth in 2017 and 2018 would be higher than in 2019 due to a cyclical slowdown in fixed investment in business and an increase in the consumption tax that had already been programmed.

As global growth had generally improved, Japanese exports had shown an upward trend, contributing to economic growth. Private consumption had also been resilient due to a better outlook in the labour market with better employment rates and higher wages.

As already mentioned, the bank expected that by 2019 the local economy would slow down a little due to a slowdown in domestic demand reflecting the closing of the cycle of expansion in business investment in addition to the increase in consumption tax since that year.

Regarding inflation, the annual change in the CPI (Consumer Price Index) excluding fresh food continued to show better figures than in 2016 with a clear upward trend thanks to a better performance of the economy and an increase in expectations medium and long term. But even the price growth is not as strong as the bank would like so they followed the price index with some caution.

The annual CPI for April excluding food and energy was close to 0%, so the bank was still expectant that the price index was far from the target rate of 2%.

Regarding monetary policy, the bank indicated that it would continue to apply Quantitative and Qualitative Monetary Easing with the Yield Curve control, with the objective of using it until inflation hit 2% so that the short-term interest rate would remain in negative territory.

Inflation could reach 2% in the medium and long-term, but not in the short term due to the weak behaviour of the main price indices. It was estimated that in the medium and long term it could reach  2% due to better economic growth rates added to energy prices that have been rising in recent years. In addition, the policy of monetary easing continued to drive the supply of credit and liquidity to the market so that inflation continued to rise to the bank’s target figure.

Also, the unemployment rate continued to decrease showing figures between 2.5 and 3%, so the labour market was narrowing which could generate an increase in the nominal wages of people, which in turn could lead people to consume more and this would boost inflation. The following two graphs show the main projections of the members of the committee and the expected behaviour of the CPI until 2019.

Graph 77. Forecasts of the majority of Policy Board Members. Retrieved 27th February 2018 from https://www.boj.or.jp/en/mopo/outlook/gor1704b.pdf

 

 Graph 78. CPI (ALL ITEMS LESS FRESH FOOD. Retrieved 27th February 2018 from https://www.boj.or.jp/en/mopo/outlook/gor1704b.pdf

 

In the July report, the committee stated that the path of economic growth was still positive due to the already exposed factors of a better global panorama and incentives created by the government to stimulate the local economy.

Regarding inflation, there were negative signals that showed a weak CPI (excluding food and energy prices), being in figures between 0 and 0.5%. The bank indicated that it could be due to the caution that the companies had at the time of fixing the prices and the wages of their workers. This behaviour of the companies caused expectations to decrease somewhat on inflation in the medium and long-term. The bank stressed that for inflation to reach 2% companies had to be more determined when setting prices and wages.

What was driving inflation in recent months were energy prices due to higher global demand for fuels and the agreements reached by OPEC to sustain oil prices, which is why the bank was concerned that the other components of the prices were not contributing to the rise of the recent CPI.

Due to the weakness of inflation, the bank decided that it would continue with its policy of monetary easing until inflation was close to levels close to 2%, so that short and medium-term interest rates would remain in negative territory. In addition, the financial market continued to offer credit facilities to the market.

Despite the weak performance, in the bank’s projections, it was estimated that in the medium and long-term the inflation rate would be at 2%, but the projections had fallen slightly on this variable for the next two years.

In the October 2017 report, the bank’s committee continued to observe a positive performance of the economy due to higher exports thanks to the better performance of the world economy throughout 2017.

In terms of domestic demand, fixed investment in business had followed a slight upward trend with better profits from companies and better expectations of entrepreneurs on the Japanese economy.

Private consumption continued to grow moderately, thanks to the better performance of the labour market. There were good rates of job creation and wages rose slightly. Public investment had also had positive behaviour during the last quarter, but not spending by households that had shown flat figures throughout the year.

Looking at the financial conditions, the outlook did not change with respect to the two previously issued reports, since the short and medium-term rates remained in negative territory. Financial institutions were still willing to lend to the market, and corporate bonds were still well received by the market, so the bank continued to observe the accommodative financial conditions.

Although inflation continued to rise slightly as in mid-2017, this behaviour was mainly explained by the rise in fuel prices and energy in general. The weak behaviour of the CPI excluding food and energy was due to the little increase in prices of companies as well as wages and a mobile phone market increasingly competitive in prices.

If you compare the projections that the bank had in October with the projections at the beginning of 2017, the CPI showed a weaker than expected behaviour, but it was expected that in 2018 and 2019 inflation would have more positive figures as shown in the following graph.

Graph 79, CPI (ALL ITEMS LESS FRESH FOOD, Retrieved 27th February 2018 from https://www.boj.or.jp/en/mopo/outlook/gor1710b.pdf

 

The reasons for a better performance of the CPI for the following years should be given thanks to better conditions in the labour market, better performance of the economy in general and better market expectations. The graph shows that inflation bottomed out at the end of 2016, showing deflationary signs.

The risks faced by the Japanese economy according to the bank were:

  • New regulations implemented in the United States and economic performance will directly affect global growth
  • Geopolitical risks
  • The Brexit negotiations
  • The problem of the European debt

These factors could affect the decline of the Japanese economy due to its direct involvement in world trade. The following graph shows the bank’s projections at the October meeting.

Graph 80. Forecasts of the majority of Policy Board members. Retrieved 27th February 2018 from https://www.boj.or.jp/en/mopo/outlook/gor1710b.pdf

 

If these projections are compared with those made at the beginning of the year and July, expectations for 2017 and 2018 improved and remained the same for 2019. That shows the good performance of the economy and a slight recovery of inflation, but as the bank reaffirmed that recovery was not robust since it was mainly based on energy prices. The other components of the CPI did not yet show positive figures, so the bank expected 2019 to be close to 2%.

As long as the inflation rate was not close to 2%, the monetary easing policy would continue. That would include negative interest rates and acquisitions, and corporate bonds to provide liquidity to the market and thus achieve better growth rates. This would encourage companies to be more aggressive in its increases in prices and wages of workers, which was not as strong as would be expected from a narrow labour market, although they did rise during 2017.

The following graph shows the CPI excluding food and energy which shows that the figure during 2017 was well below 0.5% which is negative and gives the reason why the bank committee was concerned because the basic items of the index showed a very weak behaviour.

 

Graph 81. Chart 38, CPI. Retrieved 27th February 2018 from https://www.boj.or.jp/en/mopo/outlook/gor1710b.pdf

©Forex.Economy

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Bank of Japan

The Bank of Japan is the central bank of Japan. It is a juridical entity established by the Bank of Japan Act. It has no governmental character nor is it

The Bank of Japan is the central bank of Japan. It is a juridical entity established by the Bank of Japan Act. It has no governmental character nor is it

The Bank of Japan is the central bank of Japan. It is a juridical entity established by the Bank of Japan Act. It has no governmental character nor is it a private corporation. The law states that the bank’s objectives are to issue banknotes, carry out monetary control and monitor the stability of Japan’s financial system. The law also stipulates price stability as the main objective of the bank which will contribute to the development of the national economy.

The Bank of Japan started its operations on the 10th of October 1882 as a central bank under the laws of that country. The original statutes were modified in 1942 due to the war situation and after this conflict ended, the bank’s regulations were modified again. In 1949 the Policy Board was set as the governing body and responsible for making the most important decisions of the bank. The law of 1942 was completely revised in 1997 and it was stipulated that the bank’s independence and transparency were fundamental pillars of the bank.

The organisation of the bank is divided as follows:

Graph 70. Organization Chart. Retrieved 15th February 2018, from https://www.boj.or.jp/en/about/organization/chart.pdf

 

The Policy Board was established as the most important bank entity for decision making. The board examines the guidelines for monetary and currency control, establishes the basic principles to carry out the operations of the bank and supervises the fulfilment of the duties of bank officials.

It is composed of 9 people. The Governor who represents the bank and exercises general control over the affairs of the bank, two Deputy Governors who assist the governor and they control some matters of the bank, and six members of the Policy Board who serve as support for the Governor and Deputy Governors. They are also in charge of other matters of the bank.

Then there are the Bank’s Officers who are made up of the Governor, the Deputy Governors, the members of the board of directors, auditors, executive directors and counsellors. These officers are responsible for managing the operations of banks, to ensure that employees comply with the required tasks and assist in the tasks of the Policy Board.

Finally, there are the Departments, Branches, Local Offices in Japan, and Overseas Representative Offices. There are 15 departments, 32 branches and 14 local offices in Japan and 7 overseas representative offices

The bank is capitalised by 100 million Yen due to the bylaws, and 55% of the capital is subscribed by the government. The law does not grant the holders of the subscription certificates the right to participate in the management of the bank and in the event of liquidation they are only granted the right to request the distribution of the remaining assets up to the sum of the paid-in capital. Dividend payments in paid-up capital are limited to 5% or less each fiscal period.

The central objective of the monetary policy of the bank is the stability of prices. It was stipulated as an objective from 2013 that the maximum rate of annual growth of prices was 2%, this rate promotes economic growth and the well-being of the population. Price stability is important because it provides the basis for the nation’s economic activity.

In a market economy where there is a diversity of markets, individuals and companies make decisions about consuming, investing or saving according to the prices of goods and services in addition to the interest rates of the financial system. When prices fluctuate beyond what is expected, it is difficult for agents to make decisions and this may hinder the efficient allocation of resources and revenues.

The Policy Board of the bank decides on the basic stance of monetary policy in its meetings, discusses the economic and financial situation and then makes an appropriate guide for monetary policy operations. After each meeting, the bank publishes its evaluations of the economic activity and the price level, as well as the position adopted by the monetary policy in the short term.

According to the guidelines stipulated by the board, the bank controls the amount of money circulating in the economy, mainly through Money Market Operations. The central bank offers funds to financial institutions through loans that are backed by guarantees given to the central bank.

The meetings of the board of the central bank are held eight times a year and each meeting takes two days of discussions. At each meeting, the members of the board of directors discuss and decide on the guidance of future operations in the money market. Monetary policy decisions are taken by majority vote of the nine members of the Policy Board.

One aspect that has become widespread but is still important is the independence of the central bank since the decisions made by the bank have an impact on the daily life of the Japanese people. The bank and its employees conduct economic and financial system research to be well informed about the most appropriate decision on monetary policy.

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Forex Market Analysis

WEEKLY UPDATE from January 22 to 26, 2018

 

Weekly Update’s Hot Topics:

JPY – BOJ KEEPS THE MONETARY POLICY UNCHANGED, AND INFLATION CLOSE TO TARGET.
DOLLAR – DESPITE THE DEAL TO STOP THE SHUTDOWN THE GREENBACK HAS

 

Weekly Update’s Hot Topics:

JPY – BOJ KEEPS THE MONETARY POLICY UNCHANGED, AND INFLATION CLOSE TO TARGET.
DOLLAR – DESPITE THE DEAL TO STOP THE SHUTDOWN THE GREENBACK HAS

 

Weekly Update’s Hot Topics:

  • JPY – BOJ KEEPS THE MONETARY POLICY UNCHANGED, AND INFLATION CLOSE TO TARGET.
  • DOLLAR – DESPITE THE DEAL TO STOP THE SHUTDOWN THE GREENBACK HAS CONTINUED FALLING.
  • EUR – EURO EXCEEDS 1.25 HELPED BY DECLARATIONS OF DRAGHI.
  • AUD – EXPECTED VOLATILITY DUE TO INFLATION DATA RELEASE.

 

This week, the best performer was Crude Oil <USOil> with a rise of 4.48%. WTI has reached $66 (US)/Barrel, the highest level since December 2014. Despite the strikes deal between the Republican and Democrat US Senators to stop the Government shutdown, the Dollar <DOLLAR> cannot take a breath and continued falling 1.56% this week.

 

JPY – BOJ KEEPS THE MONETARY POLICY UNCHANGED, AND INFLATION CLOSE TO TARGET.

The Bank of Japan (BoJ) decided to keep the monetary policy and the economic stimulus unchanged. Kuroda (The Bank of Japan governor) has signalled that the BoJ might be nearing the start of policy normalisation: but not so fast. The BoJ’s members voted 8-1 to keep its interest rates and asset purchases at current levels. Also, Kuroda said inflation expectations had stopped falling. The BoJ’s perspective is that the economy will grow 1.4% in the fiscal year starting in April, with an inflation of 1.4% over the same period.

The inflation data (YoY), excluding the food component, released this week has reached 0.9%. Kuroda, speaking at the World Economic Forum in Davos has said that “there are some indicators that wages and some prices have started to rise”. Also added that “there are many factors that make reaching the 2% target difficult and time-consuming, but we are finally close”.

 

Technically, the USD-JPY is completing a sideways consolidation macro-structure. Our vision is, if we expect the price to fall to 108.16 to 107.18, the yen could find buyers again.

USD-JPY  Daily Chart ( click on the image to enlarge)

DOLLAR – DESPITE THE DEAL TO STOP THE SHUTDOWN THE GREENBACK HAS CONTINUED FALLING.

This week the Republicans Senators have struck a deal with the Democrats to temporally stop the US Government shutdown which lasted for three days, the first shutdown since 2013. In this agreement, Democrats have accepted to vote for the bill while they will continue negotiating immigration legislation for “dreamers” (children that migrate illegally to the US). This agreement has as a deadline February 8.

The week has ended with the US GDP (QoQ) data release. The US economic growth is at 2.6%, that is lower than the expected 3% in the fourth quarter. Although the fourth-quarter GDP has been slowed, in 2017 the economic growth has gained momentum from the 0.9% reported in March 2017.

 

Technically, the US Dollar Index has broken down in the past week to the 88.9 level. Our vision for the next week is a limited downward turn to the 87.85 to 87.1 area, and then for it to make a potential reversal pattern to reach 91.03 level.

US Dollar Index Daily Chart ( click on the image to enlarge)

 

EUR – EURO EXCEEDS 1.25 HELPED BY DECLARATIONS OF DRAGHI.

This Thursday the common currency has raised to over 1.25, the highest level since December 2014. In the last Monetary Policy Decision ECB Conference, President Mario Draghi has maintained the accommodative policy and the interest rates will remain well beyond the end of the QE.

Regarding forex risk, Draghi signalled that “now, we have downside risks relating primarily to geopolitical and especially foreign exchange markets. But by and large, the risks to growth are balanced.”

On the technical side, once the Euro reached the weekly Fibonacci level F(38.2), it has started to make a corrective move leading the pair to the 1.24235 level. Our central vision is that the Euro could start a new bearish cycle, where our first target is 1.16845.

 

EUR-USD  Daily Chart ( click on the image to enlarge)

AUD – EXPECTED VOLATILITY DUE TO INFLATION DATA RELEASE.

In the last week of the month in the Oceanic Session, the volatility expected will come from the Inflation (QoQ) data release. The analysts expect that the CPI (QoQ) will be 0.8% and (YoY) 2.0%. Under this context, the RBA (Reserve bank of Australia) could hike the Interest Rate in the next Monetary Policy Meeting scheduled on February 6.

As has been forecasted previously, our primary vision remains bullish for the Aussie, where the long-term target is 0.8433 level from where the price could find sellers to begin to develop a major degree connector.

AUD-USD  Daily Chart ( click on the image to enlarge)