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Technical Analysis for 21/09/2016

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Technical Analysis for 21/09/2016

Technical Analysis for 21/09/2016
September 21
09:00 2016

EUR / USD – Euro US Dollar

In the morning we should expect a moderate decline in the pair amid the growing “appetite for risk” after the publication of the results of the meeting of the Bank of Japan. In my opinion, today the Japanese monetary regulator will be forced to further stimulate the economy against the background of very low inflation expectations. If we look at the history of the last three years, when the Bank of Japan was introducing new incentives, the risk assets were in steady demand. Sometimes the demand was observed only in the short term; sometimes it remained in the medium term. In any case, risky assets were supported. In this regard we can expect the decrease in quotations of the main currency pair as in the past two years the euro has become the funding currency in carry trade operations. In the afternoon all the attention of investors will be focused on the FOMC decision on the basic interest rate. Taking into account the market’s sluggish dynamics of short-term treasury bonds, it can be expected that the regulator will not make any changes today. However, it will be interesting to look at the statement of Janet Yellen. In my opinion, the head of the Federal Reserve will indicate that current figures on employment and inflation is not enough to raise interest rates but the Fed can raise the rate until the end of the year. How will the pair react? I think that at first we will see the upward movement of 50-100 points and then a downward motion and the return to the former positions.

Against this background, during the day we can expect the flat within the range of 1,1100-1,1200.

GBP / USD – British Pound Dollar


During the day we should expect the moderate growth of quotations on the background of the profit taking on short positions. Why will the investors take profits when the downward trend is gaining momentum? In my opinion, there are two reasons for this. Firstly, the yield on 10-year UK government bonds on the credit markets is increasing in relation to their counterparts in the US and the UK, which increases the attractiveness of investments in the British assets. Secondly, the release of the American Petroleum Institute, which was published on the eve, has pleased the traders with positive data. According to API, crude oil inventories have fallen by 7.49 million barrels, which allows counting on the tonight’s output of the positive data from the US Department of Energy that will support the black gold and also have a positive impact on the pound quotations.

Against this background, during the day Buy positions on the fall of quotations should be opened within 1.2960 / 1.2925 and it is preferable to take profit at the level of 1.3050.

USD / JPY – US Dollar Japanese Yen

Today is a key day for the pair since the Bank of Japan and the US Federal Reserve will announce their results.  In my opinion, today the first regulator will go to the new measures to stimulate the economy. It may lower the interest rate or increase the asset purchase program or go both ways. Why the Bank of Japan can take such measures today?  Firstly, the inflation is in the negative area. In the case if oil prices for Brent fall to $ 40 / barrel in the short term, the economy will further go into a deflationary spiral, as energy is an important component of the inflation. Secondly, the strong yen can have a strong negative impact on the Japanese exporters. The industrial PMI index from Markit, which has been below the key area of 50% for the last five months, has clearly confirmed this. As noted earlier, the US Federal Reserve will release its decision on interest rates at the end of the day. But there is a high probability that we will not see any changes. This factor will put pressure on the dollar in the short term.

Against this background, during the day Buy positions on the reduction of quotations should be opened within 101.80 / 101.50 and it is preferable to take profit at the level of 102.50.

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