It’s all about Wednesday this week – in the early hours Japan announces its monetary policy statement which, if there are any surprises, could significantly shift the markets. Much later in the day, the US announce their interest rates. Although the market is only pricing in a 12% probability of a rise from 0.5% to 0.75%, this is actually one of the best chances that Janet Yellen has to increase them. To round things off, New Zealand announce their rates, which are likely to remain unchanged at 2%.
Decisions in Japan and the US could heavily influence the markets this week.
Themes which are likely to roll over from last week are JPY strength, GBP weakness and USD indecision, unless we see any economic surprises from Japan and the States.
A stronger USD, weaker commodity prices and weaker domestic equity markets last week saw the USD dominate against the Emerging Market currencies. USD strength or weakness and any US interest rate decision is key for the future direction of these currencies, as most Emerging Market debt is denominated in USD.
US and UK markets still look a bit toppy. There’s the strong possibility of further short term corrections, but like the currency markets, they will have a very close eye on what happens in Japan and the US this Wednesday. A surprise US rate increase could see markets turn more bullish.
In the Far East, the Hang Seng and Nikkei have also seen a short term correction. The Chinese markets look the stronger and more likely to rebound, whilst the Nikkei has been bouncing around the 16000/ 17000 area.
Orange Juice continues to lead the out performers in the commodity complex to the bullish side. Base metals hold a neutral feel, whilst the Precious complex feels weaker, with funds offloading recent long positions.
WTI Crude Oil is holding around $43/$44 as the OPEC end of September meeting looms in the background.
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Information provided by Stephen Hoad BA Hons, MSc, MSTA – full time trader, technical analyst and one of the UK’s leading trader trainers. He currently lectures for the Society of Technical Analysts.