Potential Head Of BOJ Moves Markets

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Haruhiko Kuroda moved the markets yesterday with his comments. He said that there is potential for additional monetary easing this year in Japan. That contrasts with the outgoing BOJ Governor who pledged additional easing not until next year. He said that the Bank of Japan has the potential to end deflation and spur growth that has stagnated for decades. The yen weakened dramatically on his comments.

Japanese Stocks Advance On Kuroda’s Comments

Japanese markets were closed yesterday for public holiday and are starting the new week on a tear. The Nikkei 225 is up 265.73 points to 11,418.90. The market looks poised to test the 12,000 level in the next month or so. Some analysts see 13,000 not too far off as well with the strength in Japanese equities.

The yen’s move has been so dramatic that it has not been fully priced into Japanese equities and their increased profits. The weaker yen is a major boon for Japanese exporters. Japanese automakers such as Toyota and Honda look set for big profits this year. Japanese stocks are cheap on a valuation basis as they trade at 1.2 times book value compared to 2.1 for the S&P 500 Index.

The US dollar is currently trading at 94.221 yen, the euro 126.298 yen, and the Aussie dollar at 96.706 yen.

ECB Council Member Says Euro Not Overvalued

The head of Germany’s Bundesbank, Jens Weidmann, said yesterday that the currency isn’t overvalued and that governments should not make any attempt to weaken it. Most traders agree with this assessment and are forecasting gains for the euro currency against the US dollar this year. The euro jumped back above the 1.34 level against the US dollar after his comments were made.

JP Morgan Says Aussie Dollar Has Support At 1.0225 Level

JP Morgan is out with a report today stating that the 1.0225 level for the Aussie dollar is the 38.2 percent Fibonacci retracement of the currency’s advance from last year’s low of 95.82 to 1.0625. Their technical analyst is saying that this area is a level of support and that the market should bounce off this level. The Aussie is currently trading at 1.02572 to the US dollar.

Commodity Summary

Crude oil jumped yesterday as the marketplace tightened the spread between WTI and Brent. New pipelines in the US will unlock the supply that has been building in the Midwest and increase the demand for US oil. There is a $21 price gap between the two that will tighten later this year.

Gold and silver weakened as the Chinese Lunar New Year holiday began. With all the Chinese on vacation, there will be a lack of buyers from China. Gold futures are trading at $1643.90 after breaking the 200-day moving average yesterday of $1665.36. Silver is trading at $30.79 an ounce.

Corn and soybeans weakened on increased production out of Brazil and Argentina as those countries are getting rain. The saying is rain makes grain and that’s bearish for prices. Corn is at $7.02 a bushel and soybeans at $14.34 a bushel.

The one bright spot in the grain market is cotton. Cotton supplies are tightening and demand out of China is increasing. Farmers are still making more money planting corn and soybeans and are unlikely to switch to growing cotton. Less farmers planting cotton means less supply and increased prices. Cotton has resistance at 84 and is at 82.75 right now. Look for cotton to be at 100 or $1.00 a pound later this year.

Economic Data Calendar

  • 0500 Japan Household Confidence 40.5 forecast 39.2 prev (JPY)
  • 0600 Japan Machine Tool Orders (YoY) -27.5% (JPY)
  • 0815 Swiss CPI (MoM) -0.3% forecast -0.2% prev (CHF)
  • 0930 British Core CPI (YoY) 2.4% forecast 2.4% prev (GBP)
  • 0930 British CPI (YoY) 2.8% forecast 2.7% prev (GBP)
  • 0930 British PPI Input (MoM) 0.9% forecast -0.2% prev (GBP)
  • 0930 British PPI Output (MoM) 0.2% forecast -0.1% prev (GBP)
  • 0930 British RPI (YoY) 3.2% forecast 3.1% prev (GBP)
  • 0930 British House Price Index (YoY) 2.3% forecast 2.1% prev (GBP)
  • 0930 British CPI (MoM) -0.4% forecast 0.5% prev (GBP)
  • 0930 PPI Input (YoY) 1.1% forecast 0.3% prev (GBP)
  • 0930 PPI Output (YoY) 2.0% forecast 2.2% prev (GBP)
  • 1000 SNB Chairman Thomas Jordan Speaks (CHF)
  • 1345 Governor Carney Speaks (CAD and GBP)
  • 1530 ECB President Mario Draghi Speaks (EUR)
  • 2330 Westpac Consumer Sentiment 0.60% prev (AUD)
  • 2350 Japan CGPI (YoY) -0.3% forecast -0.6% prev (JPY)
  • 2350 Tertiary Industry Activity Index (MoM) 0.8% forecast -0.3% prev (JPY)

At 0930 Great Britain is releasing a huge amount of data. It will take time to parse through that much data. Pay close attention to the initial reactions and see if the market trends or reverses. The most important events thou are speeches by Governor Carney and ECB President Mario Draghi. They will definitely move the markets!

As always good luck to all binary and forex traders and be sure to check back for the latest updates! Bear in mind that China, Hong Kong, Singapore, Malaysia and Vietnam are still closed today for Lunar New Year celebrations.