May 2016 Week One – Current Market Sell-Off

As markets re-opened for the first week of May, the Japanese benchmark, the Nikkei 225, posted another three per cent sell-off as the yen continued to skyrocket, reaching an 18-month high against the US dollar.


The negative trend was reflected in Australia and Korea, where discontent about the failure of the Bank of Japan to act last week despite slowing inflation persisted, weakening regional sentiments. Widespread expectations of a BoJ boost to its asset purchase program especially in exchange-traded funds, were also negated by the Bank’s call to inaction, contributing to the insipid sentiment.


No news as yet at the start of the week on the Chinese, Taiwanese, Singaporean and Malaysian markets, as they are closed for a bank holiday. Even so, the Japanese bulls appear to have settled temporarily in anticipation of the crucial NFP release from the US.


The almost multi-year troughs reached by the EUR/JPY pair last Friday during hair-raising sell-offs eased on Monday morning, gaining 0.12 per cent to reach 122.09. This appears to have been due to a marled strengthening in the EUR/USD pair, as the US dollar sell-off continues amidst diminishing odds of a Federal Reserve interest rate hike in June or July.


For currency watchers wanting to hone their Forex trading strategies, a raft of final manufacturing PMI reports from across the Eurozone are imminent and should make for vital reading.


If commodity currencies are your poison, then the question of how to trade Forex with them profitably  should take into account the effect of the relentless recovery in oil prices, which has benefited Canada’s loonie significantly, exceeding the forecast range top of $45.0 to put 1.2500 under marked pressure.


Some pundits are speculating that the Governor of the Reserve Bank of Australia may decide to cut rates by 25 points on 3rd May, although such a move would swim against the tide of the general trend of wait-and-see decisions by central bankers. In the meantime, the AUD continues to look fragile.