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    Bank of Japan Stays the Course

    Japanese Policymakers Keep Interest Rates Unchanged

     

    Voting members of the Bank of Japan committee concerned with monetary policy have decided to keep the current interest rate in the country unchanged, amid optimism that inflation targets can be hit without further intervention. The news sparked some appreciation in the Yen, as anticipation of the 2% inflation goal being realized and steady QQE permeated the markets.

     

    A steep 6.00% rise in the price of crude oil experienced yesterday is difficult to attribute to any specific event, but a drawdown of -1.200 million barrels as reported in the most recent API inventory reading may be relevant. The price currently floating around $49.00 per barrel comes after a prolonged period of sideways trading between $48.00 and $44.11, and investors should expect that the price may slide down to the former number to establish support for future movement. The slide may occur due to normal price action or to the upcoming EIA report that is expected to illustrate an addition of 2.200 million barrels to US stockpiles, but regardless the $48.00 support level remains important to near term trends after yesterday’s session. The results of this motion in the crude oil market have driven relevant currencies like the Canadian Dollar and Norwegian Krone up.

     

    Despite prices of dairy declining -10.00% during the summer months, the same span of time saw the global dairy trade index rise 16.50% and 9.90% in an impressive rally that has driven the price of the New Zealand’s Dollar up against that of the United States. The strong gains in NZDUSD come on the back of price lows seen around 0.6236 two weeks prior, with support currently staying at levels near 0.6256. This growth is due somewhat to the weak US dollar amidst sentiment that has become more risk-off, and also partly to the strength in dairy, of which New Zealand is a prolific producer. The next major resistance level for the NZDUSD is at 0.7150 through 0.7330, a tough region that may not be tested given the August 16th short-term top of 0.6880.

    The rate of quantitative and qualitative easing purchases implemented by the Bank of Japan remains at around 80 trillion Yen per year, with this number to be unaltered as the Central Bank expects that it will be able to realize its 2.00% inflation goal without further purchases or a change to interest rates. Many believed the result of the most recent meeting to be an expansion of easing, but the Japanese remain stoically optimistic and have been rewarded with a slight boost to the Yen that saw a near-term price high at 120.36 overnight versus the dollar. This level turned into a slow decline back to 120.06 as price actions remains bound between a consolidating triangle pattern formed with the nearest 119.57 support level in mind.

     

    EURUSD Equidistant Channel Trading Opportunity

    The Euro continues to appreciate against the dollar amid continued weakness in the US currency following the most recent disastrous payroll figure.  Even though European data has not shown dramatic improvement and deflation remains a concerning downside risk, the recent spate of negative economic figures from the US has overshadowed these developments.  It is also raising the specter of expanded asset purchases which could drive the Euro lower over the longer-term.  In the near-term, EURUSD continues to setup in an emerging equidistant channel formation with ideal positions initiated at the lower channel line targeting the upper channel line.  A move below the lower channel line could signify a downside breakout to be accompanied by renewed momentum and volume.

     

    Resistance: 1.1265/1.1296

    Support: 1.1206/1.1172

     

     


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