Will the Bank of Japan Hike Rates Tomorrow?
Economical News
USD
Yesterdays trading session didn't offer any significant news as the US markets were closed for President's day. As a result, liquidity was extremely low on the USD crosses and the market was characterized by a tight trading range.
If we look over today's calendar we can't find any comfort for the USD, therefore any relief is likely to be seen only after the US CPI reports on Wednesday - we will discuss the possible CPI repercussions tomorrow at length.
With the Chicago Fed Survey and ABC consumer confidence expected for release today, the likelihood is for further pressure on the USD - especially as the interest rate differential between the Fed Futures and the European ones are minimizing.
EUR
The Euro hit a six-week highs against the dollar on expectations the Federal Reserve may cut rates. The EUR/USD reached 1.3187 and caused some profit taking for the bulls.
We do have several releases coming out of Europe later today with the market tending to favor a stronger EUR after last week's numbers tended to shift the balance of sentiment towards Europe.
In the UK, the BOE's has suggested that the GBP is probably overvalued in a published essay written to the Treasury Select Committee. The GBP crashed 100 pips to 1.9420 but quickly recovered and traded around 1.9530 at the beginning of the European session.
Tomorrow, the BoE will publish its Minutes from the previous meeting. The market will try to figure out whether the Bank of England will still raise interest rates in March given the recent weakness in UK economic data. If the decision to leave rates unchanged was unanimous, then the odds for a rate hike in March will be very low and this may push the GBP lower today.
JPY
The Bank of Japan (BOJ) starts its two-day policy meeting on Tuesday with market players divided over whether it will raise rates to a decade-high 0.5%. The central bank kept rates steady last month in a split decision.
Japan's ultra-low rates have prompted dealers to use the yen as a source of cheap funds to buy higher-yielding currencies and have encouraged many domestic investors to seek better returns in foreign assets.
Technical Analysis
EUR/USD
Volatility went up in the last week after the heavy resistance level at 1.3050 was breached, the bulls have come into action and indicators offer more room for the upside. Next resistance is set to 1.3271 where a break may cause a further uptrend and a yearly high.
GBP/USD
Low volatility offers a tight range for this pair, with heavy support at 1.9435 and neutral indicators (no specific trend direction has been spotted yet). Daily Slow Stochastic is at 40, momentum is at 98.9648 and RSI is at 41. These numbers suggest no specific trend and more likely to offer range trading.
USD/JPY
After reaching a month's low at 119.00 the USD has gained back 90 pips, daily indicators indicate that the bullish reversal is not over yet and we will probably see the 120 being breached today. Slow stochastic is curving upwards above 20 indicating that the bullish reversal is far from over.
USD/CHF
Major support level at 1.2400 has been breached 5 days ago and triggered a longer term bearish trend, however daily Stochastic is curving upwards below 20 indicating a possible relief and a slight reversal, volatility has gone up and daily RSI indicates that the bearish trend is not over yet.
Wild Card
GBP/CHF
Forex traders be watchful ! A strong support has been created at the 2.4050 price levels and a bullish reversal is very possible, Daily Slow Stochastic is curving upwards below 20 offering some bearish relief.
Market Trend
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
|---|---|---|---|---|---|---|
| Daily Trend |  |
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| Weekly Trend | |
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| Resistance | 1.3311 | 1.9770 | 121.36 | 1.2538 | 0.7952 | 0.6850 |
| 1.3248 | 1.9621 | 120.67 | 1.2505 | 0.7930 | 0.6807 | |
| 1.3207 | 1.9575 | 120.15 | 1.2470 | 0.7910 | 0.6780 | |
| Support | 1.3095 | 1.9462 | 119.00 | 1.2301 | 0.7812 | 0.6702 |
| 1.3045 | 1.9394 | 118.90 | 1.2274 | 0.7793 | 0.6658 | |
| 1.3005 | 1.9283 | 118.28 | 1.2227 | 0.7739 | 0.6603 |
Indicators
| Date | Time GMT | $€£¥ | Event | Period | Prev. | Forecast | Imp |
|---|---|---|---|---|---|---|---|
| 20/02/2007 | 09:30 | UK | PSNCR | Jan' | 13.4 | -22 |  |
| 20/02/2007 | 12:00 | CAD | CPI M/M | Jan' | 0.2% | 0.1% |  |
| 20/02/2007 | 12:00 | CAD | CPI Y/Y | Jan' | 1.6% | 1.2% | |
| 20/02/2007 | 15:00 | US | Chicago Fed Survey | Jan' | 0.04 | N/A | |
| 20/02/2007 | 22:00 | US | ABC Cosumer Conf' | Feb' | -3 | N/A | |