Good morning traders!
A new month creeps up on us as all the memories from the festive periods begin to dissolve into a haze and everyone around me, including myself, are getting ill. Not just a little cold but proper over-exaggerated man flu. Even the Dax seems to be a bit ill at the moment.
Last week the Bank of Japan (BOJ) announced that it would apply a negative 0.1 percent rate to excess reserves starting February 16. The policy decision would only apply to a limited set of funds, but the signal it sent was felt across the forex market. The Yen depreciated against all pairs with carry trade currencies being the biggest winners. The move by the BOJ is seen as applying pressure on other central banks to pick up their monetary policy actions.
Major central banks have been standing on the sidelines recently but the BOJ have delivered a shock announcement. The decision from the BOJ to move away from QE into more unconventional tools may pressure other banks into unfamiliar territory as well. Employment will be a focus this week specifically wage growth and the U.S. non farm payrolls (NFP) report will be published this Friday.
We are bearish below 9950 and forming another wedge pattern (30 minute chart below) with the overall pattern creating a flag. I am watching for a breakout from this pattern. Price has struggled to take out 9550 and this is proving to be stubborn support. If it goes then a good trade setup could be to go short on a retest of that level from the underside.
There is no clear direction in the short term and no obvious trade setup for me. The Dax may not have too much benefit from the BoJ announcement. I will wait for a better trading opportunity.
Dax Support & Resistance
|200 Day SMA||10520|