Ralph Shell @ 1:43 PM, Monday January 25 2010
Last weeks market concerned that the Federal Reserve Chairman was not going to reconfirmed seem to dissipate over the weekend. Changing a captain during a quiet period in a storm is a questionable policy. Besides if not Bernanke, who would replace him? The market seemed to have a better tone, after assurance a confirmation hearing would be held this week, however Senate confirmation hearing may contain surprises.
US equity market failed to follow lower markets in Asia and Europe. The initial strength faded briefly when home sales came in lower than expected. Home sales were down almost 17% from the previous month as the tax credit for new home buyers expired. The tax credit has been reinstated through April so sales may again pick up. The medium sales price increased to $178,300, the first increase since late 2007.
The Japanese yen found friends last week when the equities markets tumbled. President Obama's proposals to tax the banks, and curtail their proprietary trading were not well received by traders. Indication that China will attempt to slow their economy also resulted in investors curtailing their appetite for risk. Japan's problems remain and we question weather Japan and the yen is a good destination for scared money.
It has been rumored that the Bank of Japan has not wanted to implement the Minister of Finances plan to stimulate the economy. Included in those plans are an increase in the money supply to combat economic stagnation, and cheap interest rates for an extended time frame. Tonight there is a tentative announcement on the Japanese monetary policy statement, and a Bank of Japan press conference. If we receive confirmation that the BOJ is now willing to help move forward in agreement with the Minister of Finance, this should prove bearish for the yen versus the USD.
It looks like the USD/YEN is consolidating around he 90 handle, well below the 93.75 touched back in early Jan. There is always a risk of a surprise or misstatement during a press conference. Our preference is to be long the USD in the 90 area, but fear of this evening's agenda makes us cautious. Try to buy half a unit at 90.05 and another half at 89.60 with a stop on the position at 88.80.
Author: Ralph Shell - ForexRazor Analyst - Graduated from a small Ohio liberal arts college. Graduate studies in economics and history at Duke University. Ten years experience trading cash commodities in domestic and export markets. Former commodity analyst with Merrill Lynch in Chicago. Member of and floor trader at the Chicago Board of Trade for 18 years.