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BOJ extends stimulus

EUR/JPY – Daily Candlesticks
Source: GKFX / MT4 (December 18, 2020)

EUR/JPY is testing resistance from the peak formed in September, putting it on the brink of a 21-month high. The test follows a breakout from a short term consolidation, making the longer-term breakout more likely.

TAKEAWAYS

•    Bitcoin adds to the recent rally, now worth over 23,000
•    An FDA panel has approved the Moderna vaccine
•    Bank of Japan extends stimulus program by 6 months
•    US dollar on course for 6-year low
•    GBP gains as Brexit talks in ‘final stretch’ according to Barnier
•    Triple record high in Dow, S&P 500 and Nasdaq
•    DAY AHEAD: German IFO, Canada retail sales
 

GURU WISDOM


“Common sense is genius dressed in its working clothes.” – Ralph Waldo Emerson

MARKETS

*Daily closing price
↗ NASDAQ 
    12 764.75     +0.84% 
↗ S&P 500 
    3 722.48     +0.58% 
↗ DJIA 30 
    30 303.37     +0.49% 
↗ Gold 
    1 889.90     +1.65% 
↗ EUR/USD 
    1.2266    +0.57% 
↗ CRUDE OIL 
    48.42     +1.25% 
↗ Bitcoin 
    22 886.00     +9.47% 

NEWS

Bank of Japan

The Bank of Japan announced a six-month extension of its coronavirus response program that aims to lower corporate financing costs at its meeting on Friday. According to Japan’s cabinet office’s latest forecasts, Japan is expected to grow by 4% in the next fiscal year starting April 2021 – an upgrade from the previous forecast of 3.4%. The upgrade was made possible by the Japanese government’s third supplementary budget to fund the $708 billion stimulus package.

6-year low

The dollar is trading at a 6-year low on a trade-weighted basis, although the dollar index (DXY) has dropped below 90, it has not yet reached a 6-year low. The weakness in the dollar following the latest Fed meeting goes a long way to explain the massive rally in cryptocurrencies as well as a recovery in gold, silver and oil. While the Bank of England left its policy unchanged, all the other major central banks including the Fed, ECB and BOJ have either extended the size or length of their stimulus programs, adding support to stock markets and reducing the need for the dollar as a haven.
 

Record highs


The improved prospects for a stimulus deal saw the Dow, S&P 500 and Nasdaq all close at record highs on Thursday. This is offsetting concerns about the speed of the US economic recovery following an unexpected jump in weekly jobless claims. The Dow Jones rose 0.49% while the Nasdaq Composite rose 0.84%. Small caps represented in the Russell 2000 index continue to outperform. 
 

DAY AHEAD 

*Times in GMT
09:00    EUR    IFO – Expectations(Dec)     92.5    91.8
13:30    CAD    Retail Sales (MoM)(Oct)     0.2 %    1.1 %
 

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