Equities fall above 1%
On New York close we have US equities falling more than 1%. This retracement is a healthy one after weeks of upward movement and is more of a technical move and profit taking than anything else.
RBNZ. Is there going to be a Hike?
The RBNZ is expected to keep interest rates on hold at 1.75% as downward pressure on inflation slowly moves away. There are talks among analysts that the RBNZ will be the next in line among central banks to be raising interest rates. At the current moment, a few things are making that a likely possibility. We have higher commodity prices and the NZ economy is showing some strength too. However, we must also be aware that the RBNZ wants a weaker NZD and they would know that increasing interest rates would mean an appreciation of the NZD. So at this point, we believe that the RBNZ is more likely to keep rates unchanged in the near term.
More upbeat Data from Japan
There is currently more confidence that the inflation rate of 2% can be met in Japan by 2018. The BOJ have also stated that they see modest economic recovery. We will continue to observe data coming out of Japan. At the moment we don’t see the BOJ tapering off yet.
EURUSD continues its Upside Momentum
The pair rose above the 1.08 handle and next resistance to be seen at around the 1.0850 level. The risk off environment have been seen to favor the low yielding currencies such as the EUR, JPY and CHF. On the daily charts we continue to see bullish momentum in this pair and some indicators are showing overbought levels. Nevertheless, we have to continue to be vigilant and not be complacent when trading this pair as we have political risk and any political concerns may send this pair lower. We continue to look for opportunities to fade this pair at the moment.
GBPUSD. Better than Expected CPI Figures boost the Pound
The better than expected figure in the CPI have given more reasons for the market to believe that the BOE will be increasing rates sooner than later. This has caused momentum to go northwards for the Pound and the pair traded near the 1.25 handle. Indicators continue to show bullish momentum in the pair and is in line with our trade idea to go long the GBP. Take note that a smooth Brexit process is advantageous for GBP. However, there are clear risks with the Pound moving forward as UK’s economic health and prospects is something that is hard to put a finger on at the moment. On top of that we also need to see how trade agreements with EU will pan out post Brexit. These are elements which will weigh on the Pound and we have to take these risk factor into account going forward.
USDJPY continues it Downward Move
This pair continues its southward momentum and the move strengthened as the market goes into risk off mode following US equities to the downside. It has hit a new record low for the year at 111.43. BOJ is expected to maintain its monetary policy and there is even a possibility of expanding it if the BOJ sees it fit. As such with monetary policy tapering being something yet to unfold, we believe that USDJPY will continue to be supported. At the moment the pair continues to slide and 111.0 is a level of support. Any rebounds would be met with resistance at the 112.5 level.
XAUUSD surged to 1245 as Risk Off Sentiments Prevail
Gold price took advantage of the risk off sentiment and surged higher. With a weaker USD, the yellow metal have a good reason to move northwards. Continues risk off sentiment in the global markets will give more reason for the pair to move higher, possibly back up to last February’s high at around the 1263 level. Immediate support lies at the 1218 level and beyond last February’s high we have the next round number resistance at 1300.
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