EURUSD – The Latest Fed Meeting Indicate that no Rate Hike will happen in April. The sentiment wasn’t unanimous among other Fed officials, but the majority of members signaled reluctance to raise rates when there is much economic uncertainty in the markets. When the Fed discusses global risks, it’s not just about economic activity, but also includes currency manipulation.
If the Fed raises rates, this will make the USD stronger, making US exports even more expensive for the rest of the world. The euro and yen are trading at their strongest levels of recent months, which hurts their own exports. So, it’s very likely that the ECB and the Bank of Japan will devalue their currencies in the coming months, which will make the dollar stronger. Either way, I’m expecting a stronger U.S. dollar in the months ahead.
Here is the current economic situation in Europe. Germany and France have an unemployment rate of 10.2%, Italy at 11.7%, and Spain at 20.7%. And these are the top 4 economies of Europe! Other than Germany, the largest countries in the Eurozone are still suffering, and now all of them can add the migrant crisis to their list of woes. The Eurozone isn’t fixed, their banks still hold billions of non-performing debt, and the ECB will only have a worse situation with negative interest rates. Which further proves my point of additional monetary easing by the ECB should be coming. I’ll happy to collect my swap fees while I hold onto my short position.
WTI – Oil Inventory Dropped 4.9 million barrels to 529.9 million. Oil in storage dipped from record highs, but remains tens of millions of barrels above the long-term average. The price of oil had fallen steadily before the inventory report, which promptly sent the price of crude up 5%. As mentioned last week, I believe this to be speculation.
Russia now pumping more oil than at any point since the collapse of the U.S.S.R., there doesn’t seem to be much of an appetite in foreign markets for cutting back oil production. But in the US the rig count keeps on falling from 478 to 1,110 last year.
USDJPY – Japanese Yen Falls to 108 per U.S. Dollar. The yen, which touched 125 per dollar last June and sat at 121 in January, is up more than 10% this year. This is everything the Bank of Japan and Prime Minister Abe don’t want. Even with negative interest rates, Japan is having trouble getting inflation.
Expect more Japanese monetary policies aimed at driving down the yen! Which is bullish for the USD. We are seeing a strong support line at around 105.124. I will be looking for opportunities to go long at those levels.