Hi again, we´re back with our fundamental analysis of the biggest economic events this week. We covered the Canadian data which is on the schedule this week, as well as the RBA meeting minutes. The BOJ (Bank of Japan) meeting and the speeches from BOE (Bank of England) members are next on our schedule, so let´s get rolling. 

The BOJ meeting – The recent comments from Japanese officials about stepping up the monetary easing programme have increased the market expectations for further rate cuts. USD/JPY climbed about 200 pips higher after the comments, but the negative market sentiment kicked in again and the downtrend resumed.

This shows that the forex market is positioned short USD/JPY or long JPY, it´s the same thing. That´s why the BOJ must act. The chances are that they do, but the question is will they do enough so satisfy market expectations?

If they do, then the downtrend in USD/JPY which started in the beginning of this year will probably reverse. The first levels to target will be 105.50, 110, 111 and after some time we might see 116, but there´s  long way to go until then.

We might consider opening a long term forex signal in this forex pair if this scenario takes place. That´s why we´re doing this fundamental analysis, aren´t we? If the BOJ doesn´t meet the market expectations then the 100 and 99 support levels will be in danger, assuming the FED doesn´t hike the interest rates, and after some time the 95 level will come into play too.

Support and resistance levels to watch after the BOJ meeting

If they don´t act or let the market know something big is about to come soon, then it will get very ugly. So ugly, that the BOJ won´t be able to do anything to stop the Yen reaching for the sky, so don´t be a hero and try to catch a falling knife.  

BOE members – A couple of BOE members have speeches booked for this week, but the spotlight will be on the BOE governor Mark Carney. The BOE cut the interest rates in August and Carney declared victory against the world a couple of weeks ago after an improvement in the UK economic data. But, the latast economic data from the UK has turned soft again.

Will Carney hint a nother rate cut or even an increase of the QE (quantitative easing) programme? The market is already pricing in a 25% rate cut in December, so if he drops a couple of dovish comments, then those odds will rocket and the GBP will dive head first. Selling GBP/USD is a good trade if this happens.