Overnight, we saw the latest monetary policy meeting from the Bank of Japan, which resulted in no new easing measures and this kept the USD/JPY at its lows after an earlier stop loss run that put the pair back below 78.80. Instead, we saw some central bank movement in the UK where the Finance Minister (Osbourne) made comments suggesting that the Bank of England plans to enact a program to increase funding at private banks and stimulate the economy through consumer lending. These banks will receive funding at less than the market rate and money will be allocated depending on the extent to which each bank increases its lending practices.
The announcement was helpful for equity markets, and stock futures in the US are now pointed toward a higher open. All ten industry sectors in the S&P 500 are trading higher after inflation data indicated that the US Federal Reserve still has room to enact stimulus measures. Continuing weakness in the labor market would likely be the key driver if any major policy changes are seen, and this was shown in the latest round of initial jobless claims numbers that were released yesterday.
Market volatility is beginning to slow into the close of the week as investors positions themselves against the potential shocks that could be seen this weekend if Greek elections end in a surprising outcome. Trading in many brokerages is being halted during this time as many are beginning to expect some drastic price fluctuations if Greek elections are not supportive of the country’s continued membership in the EMU.
Ahead today, we will have a speech from ECB President Draghi, as well as Eurozone employment data, while in the US we will have Industial Production figures and the University of Michigan Consumer Sentiment survey. Markets are expecting a rise of 1.1% for the Industrial Production numbers, while the Consumer Sentiment survey is expected to reach 79.3.
The GBP/USD is trading higher on the shorter term time frames but we are coming into some key resistance levels that are likely to provide some excellent selling opportunities going forward. The main area to watch is support turned resistance at the 1.5630 level are prices are approaching this area at the same time the MACD reading is showing strongly negative momentum. Sells can be taken into this zone, targeting a retest of the yearly lows, although a break of that area is also looking likely.
The DAX continues to be caught in its daily downtrend channel with prices en route for a test of significant Fibonacci support in the 5830 area. Any bounces will be viewed as excellent selling opportunities, with the first resistance level to watch resting at 6320. Moving averages will also be in this region if prices can rise this far, so the upside looks to be contained, with a major yearly top now in place at 7220.