FX market this week: Central Bank monetary policy meetings (BOJ and ECB) among top-tier data/events to keep forex traders busy.

Central bank meetings are likely to be the big focus point for the forex traders in this week (Jan21-25) along with other top-tier macro data points across the globe. On top of these, headlines on US-China trade talks and latest developments of Brexit are likely to keep investors busy.

Overall, this week is expected full of action with the G10 currencies, few of them namely AUD, EUR, GBP, JPY, and NZD. Near-term volatility woes will be dictated by the upcoming BOJ and ECB meetings with USDJPY and EUJPY are in the spotlight.

In Asia, this morning China’s Q4 GDP due, JPY crosses, USDCNH and Aussie dollar are in focus. Turning to Europe, it will be a light headlight session, besides US banks will be closed in observance of Martin Luther King Day.

  • “China is expected to report on Monday that economic growth cooled to its slowest in 28 years in 2018 amid weakening domestic demand and bruising U.S. tariffs” Reuters reported.

For the week (Jan 14-18) dollar dominated against the G10 counterparts with the US, 10Yr Yields closed at 2.79, the highest level in a month.

The following are the top-tier data releases and events that will keep forex traders busy:

China Q4 GDP (Mon) and IP, UK unemployment rate (Tue), German ZEW Economic Sentiment (Tue), NZ Q4 CPI (Tue), BOJ policy meeting (Wed), Canada Retail sales (Wed), Australia labor force data (Thu), EA PMI surveys (Thu), ECB policy meeting (Thu) and German Ifo Business climate (Fri).

Bank of Japan and European Central Bank meetings:

This week USDJPY and EURJPY will react to the upcoming Central Bank’s policy meeting in a broader range than usual, especially EURJPY. We expect both the banks keep the interest rates steady, but Draghi’s comments may tune dovish in the January’s meeting. Given the recent weak economic data releases, we expect Draghi will highlight the downside risk to the EA economy.

  • Nomura Research note highlighted that “the most important discussion this month relates to the TLTROs.”
    In a research note, analysts said, “We expect some indication from President Draghi that another round of TLTROs could be announced ahead of the Net Stable Funding Ratio (NSFR) regulations, which become effective from June 2019.”.
  • In contrast, Danske Bank analysts said: “After the ECB decided to end net asset purchases in December 2018, new policy signals are not warranted at next week’s meeting in our view.”.

Chart of the week: EURJPY

EURJPY must hold 123.40 to witness further up move and further bullish bias available above 125.00 for 126.60 and 127.00.
Trade: As long as 123.40 looks for the breakout with an immediate target of 126.60 and 127.00.
The flip side, it fails to hold then we could retrace back to 122.60 and 121.30.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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