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18/2/2014 - The Current Market Sentiment

Discussion in 'Current Market Sentiments' started by fx-recommends, Feb 18, 2014.

  1. fx-recommends

    fx-recommends Content Contributor

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    USDJPY could attract the market participants’ eyes this week, with no major events from US or Europe yet this week. It has reacted as usual to the movement of Nikkei 225 by falling in the beginning of the week following the frustrating preliminary release of Japan Q4 GDP which has shown growth by only 1% yearly while the market was waiting for 2.8% from 1.1% in the third quarter.
    This dovish release could have a reaction too from BOJ which decided today to support its pro-growth package of loans by enlarging it by another Yen3.5tr to be Yen7tr from Yen3.5tr to say that all options are still available to BOJ to stimulate the growth even by further measures beyond the current abenomics which enlarge its monetary base more than Yen7tr monthly driving it up from 60tr to 70tr yearly.
    While the market is waiting for softer growth data to come with the new worrying imposed sales tax hike by 3% to be 8% with the beginning of this financial year in the beginning of the second quarter of this year which can face shrinking by 3% because of its negative consequences on dampening the consuming spending specially, if there is no enough trust to raise the wages by the companies ahead of waited depression wave to hit the Japanese economy by it.
    It is logic as the companies do not raise the wages without profits not the opposite, despite the calling from the Japanese government for the wages hikes by the companies which have actually gained liquidity by the abenomics which drove the Japanese yen down and underpinned the Japanese exports.
    In the same time, the country is still paying from its current account the bill of its dependency on oil importing for producing energy instead of the nuclear power since March 2011 earth quake and this payment which widen its deficit erode the government budget and weaken its financial situation further to be in a stronger need to be sustained by this tax hike.
    It looks the time to pay some of the price of growth in Japan which has the biggest debt to GDP ratio in the G7 reached 211% in 2012 after 4 consecutive yearly rising following the credit crunch in US and even with this new tax hike, it is not foreseeable to see this percentage getting down in the next few years while it is expected to see rising to 240% in the next financial year specially if it is to have weaker growth rate.
    So, it is widely expected to have further steps from BOJ to offset this new tax hike and to keep pressing on the bonds yields curves in Japan and afford its ultra easing stance for stimulating the economy for longer time than what has been initially estimated with the beginning of Kuroda in charge, if it is not to widen it by increasing its scale of buying.
    BOJ has decided with its new Chief Krouda to widen its monetary base from 60tr to 70tr annually till the end of 2014 and the yen has lost about 18% of its value against the greenback last year and if it is to continue in this way, the Japanese yen is expected with this stance to continue to be the world lowest funding currency for longer time while the Fed is withdrawing from its QE stance.

    God willing, USDJPY which could get over its 200 hourly moving average today ascending with this sentiment over 102 level to gain momentum to overtake its previous resisting level at 102.71 can meet now in the case of rising further resistance at 102.94 can be followed by 103.44 then 103.58 before its psychological level at 105 which has not been seen since the 10th of last month before 105.43 which could stand in front of it several times to cap it with the beginning of this year while going down again can be met by supporting level at 101.38 whereas it has formed its higher low over its recent bottom at 100.74 before the psychological level at 100 which can be followed by other supporting levels at 99.55, 99.08, 97.61 before its higher bottom at 96.55 which came over its previous bottom at 95.71


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    FX Market Strategist
    Walid Salah El Din
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    #1 fx-recommends, Feb 18, 2014
    Last edited: Feb 18, 2014
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