Today's Highlights
Correction Expected
Down Under Pressure (AUD/USD)
BoJ Tonight (JPY Pairs)
Please note: All data, figures & graphs are valid as of December 19th. All trading carries risk. Only risk capital you're prepared to lose.
Market Overview
As we enter the last week before the holiday break, stock markets around the world are fairly quiet. Even countries that don't celebrate Christmas, like China and Japan are more or less flat today.
The Dow Jones has yet to reach 20,000 despite financial media outlets beating their chests and placing it in just about every headline for the past 2 weeks. In fact, technical indicators for this index have started to point downward.
Here is a quick analysis from Trading Central, which is a technical analysis platform that we provide our premium members. As we can see, the highs are getting lower as the RSI points to overbought.
As we mentioned last week, eToro clients remain bearish on the stock indices. Some waiting for a pullback and some calling for an all out crash.
Down Under Pressure
The Australian currency has been under a lot of pressure lately. In this chart we can see the AUD/USD trying desperately to re-enter the range of 0.7450 - 0.7750 (white lines). But it was stopped by the 200 day moving average (blue line). Now that it's fallen below the previous low, (yellow circle) the future isn't looking to bright.
To add to the pressure, Australia put out a rather disturbing budget report earlier today. They have drastically downgraded their outlook, forecasting a deficit increase of AUD 10.4 billion, and downgrading their GDP growth from 2.5% to just 2% for this year.
However, they do plan to balance their budget in the coming years and that is a sign of hope.
The ball is now in the hands of the ratings agencies who need to decide if they want to downgrade Australia's perfect AAA credit rating. If they do, it could make things a bit more difficult for the upside down continent.
Bank of Japan Tonight
At their meeting tonight, the Bank of Japan is expected to sit quietly and keep their mouths shut. It seems that every step they've taken to try and weaken the yen has not had as much of an affect as the events unfolding in the United States.
When they announced negative interest rates for the first time ever back in January, the yen actually got stronger as a result (yellow circle). Here we can see a graph of the USD/JPY. (reminder: the graph moving up means yen going down against the dollar).
After battling with support at 100 yen to the dollar (red line) for a few months, it was the election of Donald Trump (purple circle) that brought the yen out of its slump.
Of course, the BoJ has thrown surprises at the market before so it pays to listen to what they have to say. They could certainly use this opportunity to scrap the negative interest rate policy that never actually worked anyway.
Now that things are going swimmingly and the yen is at a weaker, and more favorable level for Japanese exporters, what comes next?
Disclaimer: This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation.
Past performance is not an indication of future results. All trading carries risk. Only risk capital you're prepared to lose.