The Central Bank Environment has Changed

April 29, 2016

Image: Pexels

The Central Bank Environment has Changed:
The worldwide central bank environment has changed. Traders are looking to interpret things probably how they aren’t intended to be interpreted by the central banks, and ‘missed-expectations’ seems to be the buzzwords of 2016.

USD/JPY 5 Minute:
160429_usdjpy_5minute
Click on chart to see a larger view.

As we said yesterday on Twitter: CARNAGE!

We’ve written about Mario Draghi and the ECB crying wolf before, but Kuroda and the BoJ may have just taken the cake with yesterday’s monetary policy decision, and didn’t the markets let them know it!

All the BoJ has done for months on end is speak about how bad the data out of Japan is and how they must do more to help weaken the currency to spur economic growth. As in every single day we get a Reuters headline flash across our screens with comments to this effect.

Yet the day comes and they do nothing? No move further below zero. No further stimulus. Nothing.

When you tease markets with expectations and then not even under deliver, but flat out fail to deliver anything on what you have talked about, this is what you get!

USD/JPY Daily:
160429_usdjpy_daily
Click on chart to see a larger view.

The USD/JPY daily highlights the bigger picture levels with both the 110.70 level that the BoJ was rumoured to be defending following those spikes, as well as the 110.00 psych level now long gone. With price now back to swing lows and that long term trend line having been technically broken and the breakout re-tested, there is nothing bullish going on for this pair.

The Reserve Bank of Australia’s monetary policy decision next Tuesday will also no doubt come under heightened scrutiny from traders. Stevens most recently said that the effectiveness of Monetary Policy had worn off in the current global environment of negative rates and increased stimulus. Now that Australia’s inflation number has dipped below the RBA’s target band, markets are pricing in more and more chance they cut anyway.

80c
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With headlines hitting Google News like this, is there any doubt that the RBA now does nothing Tuesday and price hits the 80 handle by 3.00 pm…?

AUD/USD 4 Hourly:
160429_audusd_4hourly
Click on chart to see a larger view.

The Aussie has this week respected channel support which bodes well for this theory if you’re interested.

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Chart of the Day:
Alongside the Yen crosses, the longer term stock indices charts were the other big strugglers of the session.

S&P 500 Weekly:
160429_sp500_weekly
Click on chart to see a larger view.

SPI200 Daily:
160429_spi200_weekly
Click on chart to see a larger view.

With both the US and Australian markets at major weekly resistance, the fundamentals out of Japan exacerbated the drop.

Play the levels and let expectations do the rest!

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On the Forex Calendar Friday:
JPY Bank Holiday
CHF SNB Chairman Jordan Speaks
CAD GDP m/m

Japanese banks will be closed in observance of Showa Day;

Do you see opportunity trading Forex with Vantage FX? Take advantage on your own instant $50,000 Forex demo.

Dane Williams – @VantageFX

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