Weekly Outlook: 2015, December 20 -27

USDJPY to rise towards our end-2016 target of 134 - BNP Paribas

Attachment 17153

• "The Bank of Japan maintained its annual monetary base expansion target of JPY 80trn, but outlined some changes to the composition of purchases."
• "The BoJ extended the average maturities of JGBs it buys to 7-12 years (from 7-10 currently), announced JPY 300bn of additional ETF purchases and increased the maximum amount of each REIT issue it can buy to 10% from 5% currently."
• "These operational changes to the purchases do not directly have particularly pronounced FX implication, but nonetheless they act as a reminder of the BoJs clear easing bias. USDJPY initially rallied on the announcement, but has since come off temporarily trading below 122, in sympathy with a pullback in the Nikkei."
• "In our view the BoJ do not need to increase their monetary base expansion target or cut rates further for USDJPY to rise towards our end-2016 target of 134. We think the combination of rising US front-end yields, continued JPY portfolio outflows and FX positioning should provide a backdrop against which USDJPY can rise."

Attachment 17154

As we see from the chart above - the weekly price is on bullish market condition located to be above 100 period SMA and 200 period SMA with the ranging within the following key reversal support/resistance levels:

• 125.85 resistance level located far above 100 SMA/200 SMA in the primary bullish area of the chart, and
• 116.13 support level located near the border between the primary bearish and the primary bullish area.

If W1 price will break 125.85 resistance level so the primary bullish trend will be continuing.
If W1 price will break 116.13 support level so the reversal to the primary bearish market condition will be started with the secondary ranging (the price will be 100 SMA/200 SMA in this case).
If not so the price will be ranging within the levels.

• Recommendation for long: watch close W1 price to break 125.85 for possible buy trade
• Recommendation to go short: watch W1 price to break 116.13 support level for possible sell trade
• Trading Summary: ranging bullish

the source

Attachment 17172

US and Canadian GDP data, US Durable Goods Orders and Unemployment claims are the final highlights before Christmas break. Here is an outlook on these major events.

Last week the Federal Reserve hiked interest rates for the first time in nearly a decade showing faith in the U.S. economy. The central bank raised interest rates by a quarter of a percentage point to between 0.25% and 0.50. Policy makers reiterated that the US economy is performing well and is expected to improve further. The labor market advanced considerably reaching an unemployment rate of 5%. Furthermore, inflation is expected to rise over the medium term towards the 2 % target. Fed officials declared that the rate hike was the beginning of a “gradual” tightening cycle.

1. US Final GDP: Tuesday, 13:30. The US economy advanced more than previously estimated in the second quarter. Data showed the world’s biggest economy expanded at an annual pace of 3.9% between April and June, while economists expected GDP to stay unchanged at 3.7%. This was a welcome change from the sluggish 0.6% growth recorded in the first quarter of 2015. Economists expect GDP to rise 1.9% in the third quarter.
2. Canadian GDP: Wednesday, 13:30. Canada’s economy broke a three-month winning streak in September with a 0.5% GDP contraction. The energy sector weighed on output with a 5.5% decline in oil prices, raising concerns over growth in the last quarter of 2015. There were also declines in manufacturing, wholesale trade. Nevertheless, Canadian economy expanded in the third quarter posting a 2.3% growth rate on an annualized basis, following two straight quarters of contraction. However, economists do not expect such strong growth in the fourth quarter.
3. US Durable Goods Orders: Wednesday, 13:30. Orders for long-lasting products registered solid gain of 3.0% in October following two months of declines. Business investment was the major contributor with a 1.3% rise. Demand for commercial aircraft also increased. Meanwhile, core orders excluding transportation items rose by seasonally adjusted 0.5% in October, beating forecasts for a 0.3% increase. Durable orders are expected to decline 0.6%. while Core orders are predicted to rise 0.1%.
4. US Unemployment Claims: Thursday, 13:30. The number of Americans filing new claims for unemployment benefits fell last week from a five-month high of 282,000 to 271,000, suggesting continued improvement in the US labor market. It was the 41st straight week that claims remained below 300,000. This reading backs the Fed rate hike decision made a day earlier. While claims tend to be volatile around the holiday session, the trend continued to point to a robust employment conditions. The four-week moving average of claims slipped 250 to 270,500 last week. The number of jobless claims is expected to reach 270,000 this week.

the source

Daily price is breaking 100-day SMA (100-SMA) and 200-day SMA (200-SMA) from above to below for the reversal of the price movement from the ranging bullish to the primary bearish market condition. The price is located within the following key reversal support/resistance levels:

• 2079.76 key resistance level located above 100-SMA and 200-SMA near the border between the primary bearish and the primary bullish trend on the daily chart, and
• 1992.50 key support level located below 100-SMA/200-SMA in the primary bearish area.

Attachment 17225

RSI indicator is estimating the bearish breakdown to be continuing.

• If the price will break 2079.76 resistance level so we may see the reversal of the price movement from the ranging bearish to the primary bullish condition.
• if price will break 1992.50 support so the primary bearish market condition will be continuing.
• if not so the price will be ranging within the levels.

Resistance	Support
2079.76	1992.50
2116.16	N/A

The Strategy: watch close price to break 1992.50 support level for possible sell trade. Alternateve - watch price to break 2079.76 resistance level for possible buy trade