Traders should be prepared for swift and volatile broad markets today and perhaps the remainder of this week as financial institutions and investors come to grips with the Japan tragedy. The scope of the devastation in Japan is still be grasped and there are developing stories such as the stabilization of nuclear facilities that are being grappled with. The currencies and some equity markets were able to trade on Friday after the earthquake hit Japan. Therefore some reaction has already been translated into the market, but with a weekend of contemplation there is sure to be additional insight. The Japanese story is not the only impetus the broad markets must deal with. The situation in the Middle East and North Africa remains liquid. And talk surrounding the Central Banks and interest rate policy due to the fear of inflation creeping into the major economies will continue to be heard.
The Bank of Japan has already met earlier today and announced that they will pump an enormous amount of JPY into their economy. The Federal Reserve is due to issue their FOMC Statement tomorrow. Today the Industrial Production numbers will come from Europe. The clear focus for investors will be weighing the short term impact against long term outlooks going into today’s trading and there are many questions and concerns. The price of Crude Oil should be watched, this because the commodity actually declined on Friday after the initial reports from Japan. But trying to interpret this may prove difficult. Equity markets may be under pressure today, but again sentiment is more than fragile and traders must be prepared for anything.
The USD did show some stability last week as it gained slightly against the EUR and GBP managing to hold onto some of its gains going into the weekend. The JPY actually picked up strength after the earthquake in Japan and its trading is certain to be a focal point. Traders with a taste for speculation may find the JPY interesting, but they should be aware that the JPY has a history of getting stronger when risk adverse events come to the fore. Certainly because of the disaster in Japan and the Bank of Japan’s stimulus package announced today the currency will be tested. Again short term versus long term must be taken into consideration.
The price of Gold moved in a fairly stable manner before going into the weekend. It did gain slightly and finds itself around 1423.00 USD as of this writing. The AUD also experienced range trading and remains in the stronger realms of its value, but off of its highs. The precious metal should be watched with a keen eye this week.
This is certain to be an important week for financial institutions as they try to decipher the impact from the Japanese situation and the potential affects that it poses. The situation remains unclear. There will be a wide breath of opinions offered from economists regarding the situation. Japan already runs one of the biggest debt ratios in the world when weighed against their GDP. The ‘great recession’ that has plagued Japan for the past twenty years will be put to the test. Some predict that Japan will actually experience growth because of the amount of money that will come into the economy as infrastructure is rebuilt in the midterm. However the news is still developing and traders must stay alert.
Caution is certain to be a byword today and the remainder of the week. Opportunities will abound, but traders will have to gauge the amount of risk they are willing to take.
Written by bforex.com
