Today’s Key Market Drivers: 31st July 2018
“Will BOJ Governor Kuroda announce a change in policy today?”
The moves on currency markets on Monday particularly the move higher on the Euro didn’t have any major backing either technically or fundamentally therefore traders are eager to get this week underway with more economic data and Central Bank reports. The Bank of Japan’s July statement is the headline announcement the market is waiting on today. Usually a BOJ statement comes and goes without any major fuss, however, last week rumours were swirling that the BOJ may reduce its stimulus program and therefore the Yen was supported. Governor Kuroda will confirm or deny those rumours today and I want you to know that the BOJ Governor is known for surprises so it won’t shock me to hear the BOJ is going to reduce the size of its money printing program. If this was the case it would be positive for the Yen in the short term. Stock indexes in the US closed lower and this helped support the Yen against the US Dollar on Monday and whilst some base currencies against the Yen did move higher those moves may be reversed today. Kuroda doesn’t have to announce a reduction in the stimulus to force traders to rally the Yen, he will merely have to mention reducing it in the future and that will be enough.
Overall currency markets traded in a tight range Monday awaiting all of the key economic data numbers for the week and as you will see below it took me three snap shots of my economic calendar to get all the high impacting news items listed in the report. So why after an average German CPI number has the Euro rallied on Monday? The only logical reason I can think of is profit takers. There were a lot of traders short on the Euro for the past couple of weeks particularly since the ECB’s statement last Thursday. There was no positive data or news to warrant a rise in the Euro and therefore I conclude it was likely driven by those traders who were short and exited their positions for profit.
I am currently short AUD v NZD and AUD v JPY (plus NZD v USD on a long term short hold) and I noted this morning that the AUD v NZD has finally broken ranks and moved below the 200 EMA on the 4-hour chart. The momentum was not substantial and we will need to see some more sellers in coming days. We have been sitting patiently for over two weeks and there was some movement at the station overnight so let’s look forward to some follow through in coming days. The AUD v JPY will see increased volatility today and to be frank with you I am looking for BOJ Governor Kuroda to announce something around the stimulus program that will be Yen positive. If stock markets remain weak that will also be Yen positive.
A price rejection trade on the GBP v NZD has confirmed on Monday (late) and I was already sleeping. I walk you through this trade in my daily video update as it has the new filter correctly applied.
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About the Author: Andrew Barnett
Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular keynote speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).
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