EU Indices Up on Italy, Asia Gains on Trump; BoJ Decides on Policy

Sentiment Gets Boosted by Italy’s Rating Relief and Trump’s Remarks on Trade

The dollar traded higher against most of the other G10 currencies yesterday. It gained the most against the safe havens JPY and CHF, while it lost ground only against NZD. The greenback traded virtually unchanged against CAD, while AUD was among the currencies that managed to resist, ending only slightly down.

FTSE 100 — Technical Outlook

On Friday last week, we saw the FTSE 100 cash index bouncing off from the lows near the 6850 level and pushing itself higher. Yesterday, the UK index had a bit of a choppy session, but nevertheless didn’t roll over below the recent lows and held strong. Even though on a bigger picture, FTSE 100 still forms lower lows and lower highs, and continues to trade below the medium-term downside resistance line drawn from the high of the 8th of August, from the short-term perspective, the index is now trading within a range between the 6920 and 7090 levels. For now, we remain flat and wait for a breakthrough one of the sides of that range.

Bank of Japan Decides on Monetary Policy

Tonight, during the Asian morning Wednesday, the BoJ concludes its two-day monetary policy gathering. The latest meeting passed unnoticed with the Bank keeping is policy framework unchanged via a 7–2 vote and maintaining the view that Japan’s economy is expanding moderately. What’s more, officials reiterated that they intend to maintain the current extremely low levels in interest rates for an extended period of time.

EUR/JPY — Technical Outlook

Last Friday, EUR/JPY showed a good strong reversal back to the upside and since then it continues to drag higher. From the short-term perspective, the pair could continue climbing, but the issue here is the downside resistance line drawn from the 26thof September, which could hold the rate down. Even though we could see EUR/JPY moving a bit more to the upside towards the downside line, as long as that line remains intact, we will aim back down again in the near term.

As for Today’s Events

Apart from politics, EUR-traders are likely to keep an eye on Germany’s preliminary CPI data for October, as well as Eurozone’s 1st estimate of Q3 GDP. Getting the ball rolling with Germany’s data, expectations are for both the CPI and HICP rates to have risen to +2.4% yoy, from +2.3% and +2.2% respectively. Something like that could raise speculation that Eurozone’s headline CPI rate, due out tomorrow, may rise as well. With regards to the bloc’s GDP, the forecast suggests that the Euro area economy continued growing at the same pace as in Q1 and Q2, which is +0.4% qoq. Combined, the data may calm somewhat investors’ fears over Eurozone’s economic performance, but we expect participants to stay on guard ahead of the bloc’s inflation numbers, due out tomorrow. Even if the euro recovers somewhat on the data, we expect political uncertainty surrounding Italy and Germany to keep any gains short-lived.

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