BoJ likely to be relaxed in Asia trading

20 December, 2016

It's early into the trading week but already markets are looking to pick up and make some early moves and none more so the Yen which is expecting some interesting moves tonight in the wake of the Bank of Japan Monetary statement. Certainly the Bank of Japan has been looking to strike a chord in an effort to get the exchange rate moving, but with the rise of Trump and the large movements of the USD in the wake of the likelihood of further rate hikes we've ended up in a scenario where they may look to hold fire at this stage and wait and see how things further play out. The weakening of the Yen against the USD has always been an important factor to their strategy of driving inflation within Japan, and this may create the environment needed without having to commit to any further large market movements. So the market may not expect too much apart from a wait and see strategy from the Bank of Japan.

The market expectation so far looks to be the case, and with the USD selling it seems the market is pricing in something albeit a bland move from the Bank of Japan. The touch today at support at 116.591 continues to lend weight to the idea that further bullish movements are likely for the USDJPY unless the Bank of Japan suddenly became very hawkish - which seems very much unlikely given the recent moves in Japan. Looking forward bullish sentiment is likely to persist in the short term if you're following the trend targets for resistance at 120.200 don't seem all that unlikely.

Gold has continued its rush downwards in response to the recent USD movements which have seen it struggle to make any ground in the wake of the likelihood of interest rates being lifted further. So far the US economy has gone from strength to strength and the lifting of interest rates has a flow on effect for fixed income traders looking to hold the USD. Previously gold bugs had talked up the prospect of gold, but with the new president elect coming in soon they have gone fairly quiet on this turn.

The effects are quite plain to see on the charts as gold has been in a bearish trend lower now since November and it does not look like it's going to abate anytime soon.  The push upwards today came on the back of the USD selling, but it failed to break through resistance at 1141 and we could see further swings lower as a result of this. I would expect gold to further extend a leg lower on the charts to the next level of support at 1109 especially with Core Durable goods orders coming up during the week and with the strong possibility they will impress. 


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