News background and trading ideas for 30/10/2018

30 ott 2018

Monday was not a day of big moves in the financial markets. One of the causes was the absence of significant fundamental reasons.

Today in that regard looks more promising. The data on the GDP of the Eurozone is the most interesting. Expectedly, growth for the quarter will be 0.4%. The figure itself is not very impressive (almost 10 times less than the growth rate of US GDP), but in case it will be worse than expected, the euro will be under strong downward pressure.

Another important event, which, however, will take place in the morning on Wednesday, that’s why it is worth talking about it already today, - is the announcement of the outcome of the Bank of Japan meeting. The Japanese yen is unlikely to find serious support in the person of the Central Bank and its decisions. According to a Bloomberg survey, 46 out of 46 surveyed analysts do not expect any changes in the parameters of Japan’s monetary policy. At the same time, 63% of analysts do not expect changes in the forecasts of the Bank of Japan regarding inflation expectations, and 33% are even waiting for them to decline. Against this background, we should not expect aggressive actions by the Central Bank. Even despite the fact that next year in Japan is expected a tax policy tightening - the sales tax will be increased from 8% to 10% - the Central Bank does not plan to intervene and further support the economy.

Generally, up to 2020, with the current conditions, any changes in the monetary policy of Japan is not expected. This means that the interest rate differential between the United States and Japan will continue to grow, which again will put pressure on the yen. Do not forget about the temptation of the devaluation of the Japanese currency in case of the beginning of the active phase of the trade wars between the United States and Japan.

That is, strategically everything points in favor of the growth of the USDJPY pair. Therefore, we recommend buying the pair USDJPY.

Other our trading ideas are still unchanged: looking for points for mid-term purchases of the British pound with targets of 1000+ points, selling oil and the Russian ruble, and also carefully buying gold.