The month of January was quite an eventful month with more power to the bears and also the big surprise from the Bank of Japan introducing a negative interest rate for the first time. All major stock market indices are currently in a bear market which is mostly blamed on the Chinese Yuan devaluation and economic slowdown. But in reality, most US economic data are also in recession: Industrial production, export, capex, Durable goods order and producer prices are all in recession at the moment. Let’s bear in mind that the last quarter GDP figure also came below expectation.
Bank of Japan tried to safe the market from further collapse by introducing a negative rate. The market rallied on the back of this action but in reality how long will this last? Japan over the past couple of years has embarked on massive stimulus which has not yielded any positive result. Inflation in Japan is still below the 2% target and it has been revised forward to first half of 2017. This are proofs that monetary stimulus is not working anymore! Bank of japan need to consider other monetary policy
This week will be quite busy for the market. The Royal bank of Australia will be giving their monetary statement and interest rate decision. The bank is expected to talk down Aussie likewise the Reserve bank of New Zealand. The Bank of England super Thursday comes up later in the week. The Bank of England will come up with inflation report and policy statement. Finally the NFP data will be released on Friday.
Technically, Eurusd will be an interesting pair to watch, the support level remains at 1.077 which is a confirmation of a possible rally above 1.10. USDJPY is holding below the resistance level at 121.70 which means we might see prices slide back below 120 except price rally above the resistance level at 121.70. GBPUSD is another currency to keep an eye on. There are a lot of fundamentals which might push prices lower most importantly the UK referendum and low inflation figure. We might see prices slide below the 1.40 handle.