GROWTHACES.COM Trading Positions
USD/JPY: long at 115.00, target 118.50, stop-loss 116.40
USD/CHF: long at 0.9560, target 0.9760, stop-loss 0.9530
EUR/CHF: long at 1.2025, target 1.2095, stop-loss 1.1995
EUR/GBP: short at 0.7990, target 0.7840, stop-loss 0.8060
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EUR/USD: Focus On The FOMC Minutes
(sell at 1.2580)
- Minneapolis Federal Reserve President Narayana Kocherlakota (voter, dove) said yesterday the Federal Reserve is risking its credibility by not acting aggressively enough to bring inflation back up to its 2% target. Kocherlakota was the only Fed policymaker to dissent on the Fed's decision last month to end its bond-buying stimulus, repeated his view that inflation won't rise back to 2% until 2018. In his view a rate hike next year would be inappropriate unless inflation shows signs of heading back to 2% within a year or two.
- Investors’ focus turns to the Federal Reserve which will release minutes of its latest policy review today. The Fed minutes are likely to sound relatively more hawkish which could give a boost to the USD.
- Our trading strategy for today is to sell EUR/USD before the FOMC minutes. We placed our sell order at 1.2580. Our target will be 1.2400 near the lows from last Friday.
Significant technical analysis' levels:
Resistance: 1.2580 (high Nov 17), 1.2591 (hourly high Oct 31), 1.2617 (high Oct 31)
Support: 1.2470 (200-hma), 1.2467 (10-dma), 1.2442 (low Nov 18)
USD/JPY: Will The 117.95 Be Broken Today?
(we have raised the target to 118.50)
- The Bank of Japan kept monetary settings and its upbeat economic view unchanged today. As widely expected, the central bank voted to continue its purchases of government bonds and risky assets, maintaining its pledge of increasing base money, or cash and deposits at the central bank, at an annual pace of JPY 80 bn. The BOJ said in a statement: “Japan's economy continues to recover moderately as a trend, although some weaknesses remain mainly in output.”
- The BOJ voted 8-1 for steady policy against 5-4 vote for easing last month. Board member Takahide Kiuchi, a sceptic of the current quantitative easing programme, dissented to the policy decision in a show of his continued disapproval to last month's surprise monetary easing that was made by a closely split vote. The other three of the four dissenters of the October 31 easing voted for today's policy decision.
- BOJ Governor Haruhiko Kuroda in reaction to sales tax postponement said: “I understand that whether to raise the sales tax is something the government and parliament decides, taking into account economic and other conditions. Speaking in general terms, it's important for Japan as a nation to maintain market trust in its finances.”
- The USD/JPY and most JPY crosses rose in Asia. A larger majority of the BOJ supporting current monetary easing gave a boost to the USD/JPY. The market expects also an acceleration of monetary easing next year given determination of the authorities to achieve the inflation target of 2%.
- The USD/JPY broke above the level of 117.00. The nearest support level is at today’s session low of 116.81. The strong resistance is at 117.95 – October 2007 high. In case of breaking above this level the USD/JPY is likely to go near 118.50 (levels not seen since August 2007).
- We have raised the target of our long USD/JPY position to 118.50. We expect hawkish FOMC minutes, supportive for the USD bulls.
Significant technical analysis' levels:
Resistance: 117.95 (high Oct 15, 2007), 118.00 (psychological level), 118.52 (high Aug 14, 2007)
Support: 116.80 (session low Nov 19), 116.33 (low Nov 18, 116.00 (psychological level)
GBP/USD Firmer After BOE Minutes
(we stay sideways, outlook is bearish)
- The Bank of England released minutes of the Monetary Policy Committee's November 5-6 meeting. Two BOE policymakers (Ian McCafferty and Martin Weale, who have voted for a rate hike since August) voted again for an increase in interest rates this month. They continued to point out that below target inflation was largely the result of a higher exchange rate and lower raw material prices.
- The minutes said some members thought there was a risk that economic growth might soften further than anticipated and inflation might stay below target for longer. Let’s remind that last week, the BoE issued new forecasts that showed British inflation will likely fall below 1% in the next six months. Yesterday’s figures showed inflation edged up to 1.3% in October from 1.2% in September. BOE Governor Mark Carney suggested markets were right to rule out an interest rate hike any time soon.
- The GBP/USD firmed after the release of the minutes. The median forecast for the minutes outcome was 7-2 vote, but there was quite high risk that one or both of the hawks supported the majority. The GBP/USD bulls were relieved to see an unchanged minutes outcome. The rate went up to 1.5676, near yesterday’s high.
- We are looking to use upticks to get short on the GBP/USD. The next target for the currency bears could be near 1.5400.
Significant technical analysis' levels:
Resistance: 1.5737 (high Nov 17), 1.5751 (10-dma), 1.5780 (high Nov 13)
Support: 1.5593 (low Nov 13), 1.5563 (low Sep 6, 2013), 1.5556 (low Sep 4, 2013)