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All Eyes On Japan With US On Holiday

CMC Markets

It’s Martin Luther King Day and as is often the case when US markets are closed, overseas markets are trading moderately positive in light trading. European indices are trading higher while treasury yields continue to fall with Portugal now down under 6% and Greece down to 10.25%. The last time Greece was under 10% was in October of 2010. UK Prime Minister Cameron’s speech on the country’s future in the EU has been rescheduled for Wednesday morning but with some excerpts having been reported on last week, it may not have the same resonance. The big action over the next 24 hours is likely to be in Japan. Tonight’s Bank of Japan monetary policy decision could be a big moment for the country. The newly elected LDP government has been putting pressure on the central bank to double its inflation target to 2% and aggressively increase QE in order to fight off deflation and get the country’s long moribund economy moving. In recent weeks, JPY has been selling off and the Nikkei has been soaring on anticipation that the new government would get its way. Today they two markets are reversing course suggesting either that traders expect the Bank of Japan won’t go far enough or that significant stimulus has already been priced in and that some are already starting to take profits. Regardless, this evening should be an active time for both JPY and the Nikkei. Economic news UK Rightmove house prices are up 2.4% over year, up from a 1.4% gain last month. There are a number of key announcements due out tonight and tomorrow morning: Japan interest rate decision around midnight ET, an increase to the inflation target and QE widely expected UK public finances and borrowing 4:30 am ET Tuesday Germany ZEW investor survey 5:00 am ET Tuesday Canada retail sales 8:30 am Tuesday North American indices The Dow Industrials (US30 CFD) is bumping up against 13,650 where a breakout would take it to its highest level since late 2007 with next upside resistance near 13,750 then 14,000 with initial support near 13,500. The S&P 500 (SPX500 CFD) remains in an uptrend, holding near 1,485 with next key resistance on trend near 1,500 and support near 1,475. The S&P/TSX 60 (Toronto60 CFD) is testing 732 today, a key support/resistance level. The next key test on a breakout would appear in the 750 to 760 area with initial support near 725. Commodities today Copper remains above $3.60 but below $3.72 as a big ascending triangle continues to form below $3.82. US crude is quiet in the $95.00 to $96.00 range. With RSI overbought, it could correct back toward $94.50 or even $93.00 while keeping its uptrend intact. UK crude is sitting near the middle of an $111.00 to $113.50 trading range. Gasoline is holding near $2.80 as it continues to form an ascending triangle below $2.85 with next resistance on a breakout near $3.00 then $3.10. Natural Gas continues to drive higher with temperatures falling in consuming regions. It’s broken $3.50 and rallied toward $3.60 with next resistance looming near $3.65 then $3.85. FX this morning Gold is holding steady above its $1,680 breakout point where it took out a key downtrend resistance line. A move through $1,700 would confirm the start of a new uptrend with next resistance near $1,720 then $1,760. Silver continues to climb after clearing $31.50 which may become new support. Next potential headwinds to the current upswing appear near $32.00 then $33.50 and $34.75. Platinum is consolidating near $1,675.Overbought conditions have eased and support has moved up toward $1,660 but $1,700 still looms as a key resistance level. USDCAD failed to clear downtrend resistance near $0.9950 but has been holding above support near $0.9910. EURUSD is off a bit today but remains supported above $1.3260 with next resistance near $1.3370 then $1.3480. GBPUSD bounced up off of $1.5830 and with RSI getting oversold, that key support level could hold. Initial resistance on a rebound appears near $1.5880, $1.5920 and $1.5960. USDJPY is having trouble holding above 90.00 suggesting major psychological resistance near that level. Initial support appears near 89.50 then 88.00. Overbought RSI rolling down suggests we could get a correction against the BoJ announcement. AUDUSD is holding just above $1.0500 with resistance near $1 0600 and support near $1.0420.