The Current Market Sentiment‏

As what has been mentioned in the previous report, the USD reacted and took a direction after the Fed’s decision of tapering as it has been fully priced in the market and the pace of tapering can be the next market concern in the coming period after the Fed has lowered its monthly MBS buying by $5b and also Treasuries buying by $5b on the improving of the labor market conditions as it has referred mainly in its assessment.

The Fed will continue buying from now on $35b of MBS monthly and $40B of Treasuries after this decision which can be named the first tightening action of its QE policy which reached its widest pace on 12th of last December meeting when it has decided to buy $45b of US Treasuries monthly to be added to $40b have been deployed on 24th of October 2012.for buying monthly Mortgage-backed securities.

The US Equities market rose following the decision of tapering by only $10b which suggests that the pace of cutting the monthly scale of buying will be slow. The US Treasuries yield rose following directly following the decision to watch UST 10YR yields rising above 2.90% before easing down below it again to be currently at 2.88%.

The Gold has fallen by the Asian session to be traded near 1220$ per ounce and the forex market has watched volatility directly following the decision before pushing the greenback up clearly across the broad to be traded currently over 104 versus the Japanese yen which was sensitive to the action as the yields differences in the money markets between US and Japan are exposed to go larger while BOJ is looking clinging to its ultra easing stance which has been adopted this year to be ended with the end of 2014 for getting rid of the persisting deflation pressure which contained the Japanese economy in the last 15 years.

The discrepancy between the monetary policies in US and Japan are expected to control the relationship between the greenback and Japanese yen in the coming period. However it is not quite clear enough currently as the QE base is still considered the Fed adopted policy not the interest rate like BOJ which is depending on its unprecedented wide monetary base. So, the Eyes will be hanging on following the changes between the bonds yields in both countries and their outlook in light of the economic performance before taking USDJPY position By God’s will.

While the Japanese trade balance is still negatively impacted by the dependence on the oil imports for producing energy following March 2011 Earthquake while the Japanese yen is struggling behind the abenomics in Japan which has grown in the third quarter by 1.1% yearly while the market was waiting for 1.6% from 1.9% in Q2.

USDJPY which can gain momentum after reaching a new year high at 104.35 on the back of Fed’s decision of tapering can face now by God’s will in the case of rising further the psychological level at 105 which can be followed by other resistances at 107.16, 108.02, 109.18 which can be followed by 110 before its formed top on 10th of August 2008 at 110.66 while going down can be met by supporting levels at 102.49, 102.14, 101.61, 101.12 before the psychological level at 100 which can be followed by other supporting levels at 99.55, 99.08, 97.61 before its higher bottom at 96.55 which came over its previous bottom at 95.71