Market Update – July 12th 2016

Market Update – July 12th 2016

Important week ahead of us as two major central bank are preparing to set the monetary policy for the period to come and market volatility should be on the rise.

 

Before discussing the interest rate decisions, it is worth mentioning that US equity markets closed at new all-time highs on Monday on the back of Bank of Japan (BOJ) talking about more stimulus. Mr. Bernanke and Kuroda had a meeting and it appears that Bernanke gave a green light for more stimulus in Japan.

 

Needless to say that the JPY was on a tear lower Monday and early Tuesday as the USDJPY is trading now at 103.70 area while the EURJPY is dealing over 115, in a few hundred pips move in the last thirty hours.

 

Coming back to the two central banks, on Wednesday there is Bank of Canada (BOC) monetary policy meeting and markets are not expecting much out of it. However, the USDCAD looks quite interesting as it is forming a triangle on the daily chart and this triangle is not yet broken. On a break and a retest, we have the certainty that a new trend started for the US dollar in general.

 

The much awaited Bank of England (BOE) meeting on Thursday will most likely bring the first rate cut in quite a while in the UK as Mr. Carney made it clear it needs a lower currency in order to stimulate exports.

 

The political turmoil seems to be done in the UK as well as a new Prime Minister is about to be invested Wednesday so from now on it is only a matter of time until things will get to normal at least from this point of view.

 

Non-Farm payrolls in the United States last Friday were coming on the upbeat, and the US dollar gained especially against the Euro, but those gains proved to be unrealistic as Monday and Tuesday the whole NFP move was retraced.

 

Moving into the end of the week, it will be very interesting to see how the GBP will react on the BOE move, as well as USDCAD reaction to the BOC interest rate decision.

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