The Japanese yen strengthened in early trading after the BOJ released minutes from the December meeting. The minutes showed that there were disagreements about the level of the bond yields. A member of the BOJ said that the long-term yields should be allowed to move negative temporarily, a statement that was accepted by another member. The two argued that conducting operations to raise yields would tighten the monetary policy. Another member argued that the bank should strengthen the policy to reach the 2% target. The BOJ is having a difficult time because the global economy is slowing, and the inflation is way below its target. The corporate services index rose by 1.1%, which was lower than the consensus estimate of 1.2%.
The US dollar index weakened slightly as traders looked ahead to key data expected this week. The most important will be the first reading of the US GDP and the interest rates decision by the Federal Reserve. The US GDP numbers will be released on Wednesday and are expected to show that the economy expanded by 2.5% in the fourth quarter. This will be lower than the 3.5% growth in the third quarter and the 4.2% in the fourth quarter. The slowdown of the economy is expected as the effects of Trump’s tax cuts becomes normalized.
In Asia, stocks were largely higher following gains made by Wall Street last week. In Hong Kong, the Hang Seng index was higher by 0.5% while in mainland China, the A50 index rose by 60 basis points. In Japan, the Topix declined by 0.3% as shares in Japan Display declined by more than 6%. Markets in Sydney were closed as Australia celebrated Australia Day. In the US, futures pointed to a higher open with the Dow and S&P 500 gaining by 0.97% and 1.12% respectively.
EUR/USD
The EUR/USD pair was little moved in the Asian session as traders look forward to a statement by Mario Draghi later today. The pair reached a high of 1.1420. On the hourly chart, the current price is closer to the 50% Fibonacci Retracement level and is below the 21-day and 42-day EMAs. There is a likelihood that the pair will reach the 50% Fibonacci level of 1.1430, where it will find some resistance.
GBP/USD
The GBP/USD pair remained closer to last week’s high of 1.3220 as traders wondered whether the sharp upward trend will continue. The pair is now trading at 1.3200, which is above all the major moving averages while the RSI has finally crossed into the overbought levels. The momentum indicator appears to be easing. There is a likelihood that the pair will ease a bit this week. If it does, it will likely test the important support of 1.3000.
USD/JPY
The USD/JPY pair rose slightly but remained near last week’s low of 109.26. It is now trading at 109.34. On the hourly chart, the pair’s price is below the 21-day and 42-day EMA. It is also slightly above the lower band of the Bollinger Bands. The Relative Strength Index has fallen closer to the oversold level of 30. There is a likelihood that the pair will resume the downward trend.
