Forex Trading Library

Japan may be the next major impediment in the world wide recovery

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Among the most interesting events next year will be the situation in Japan. Last week we had a mix of data of which the positive ones came from Japan’s Governor Haruhiko Kuroda, who claimed that the central bank is encouraging companies to raise the wages. He tried to give a lesson to the business leaders by reminding them that “It is not the strongest of the species that survives, but the one that is the most adaptable to change.” Meanwhile, among news from last week the monthly preliminary industrial production reported down to -0.6%, retail sales decreasing to 0.4% and average cash earnings going down to -1.5% can be considered as negative fundamentals.

It’s clear that for the Japanese economy the economic numbers are worrisome while the people who take responsibility for the current situation are trying to see the bright side. The reality is that the yen is falling (almost 13% in 2014) and will continue to fall in 2015. Exporting companies seem to not benefit so much from this situation while foreign investors are seriously losing interest in the Japanese stock market. The impact of Abe’s initial focus in 2015 with a fiscal – stimulus package and lower corporate taxes while the government approved 3.5 trillion yen of extra spending to aid the economy is yet to be seen. USDJPY is at 120.25 and the ascending trend may gain momentum once the 121.80 threshold is exceeded.

While in Europe, even in the last week of the year, the single European currency has enough reasons to fear the local laws as the third round of elections will be held in Greece today. Prime Minister Antonis Samaras will fight today against his candidate Stavros Dimas to win presidential elections with 180 votes after losing last week with 168 votes. If this third attempt will fail, we may see the parliament dissolved and elections called. Depending on the outcome of this situation, the EURUSD may retest the 1.2200 level by the end of the day.

The Australian and New Zeeland dollar may be seen continuing the corrections in the descending trend as China is taking measures to stimulate lending to support economic growth and HSBC Final Manufacturing PMI, which will be published on the 31st of December, may show that the manufacturing sector stopped contracting, at least for a while.

The oil market seems to end the year on a pessimistic note which may signal a negative outlook for 2015 as well. Concerning the Brent oil, we witnessed some positive corrections as a conflict in Lybia encouraged speculations that the production may be affected. The situation was clarified and the descending highs and lows continued their evolution. The American oil inventories rose last week, adding pressure on the WTI oil price so the quotation lowered to 55.40 dollars per barrel. For now, there are no reasons to believe that the descending trend in oil will reverse in the first quarter of 2015.

For now all we can hope is a brighter 2015, but let’s not forget that no matter how the situation is evolving there is always an opportunity in the market to benefit from.

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