Bank of Japan Governor Kikuo Iwata has given the clearest indication so far that the central bank’s policy board may raise interest rates soon, and stressed the possibility of the BOJ taking action at its December meeting.
Bank of Japan Governor Masaaki Shirakawa said in a speech to local business leaders in Nagoya on Monday that the central bank will “weigh the pros and cons of raising the policy interest rate and make an appropriate decision based on domestic and international economic, inflation and financial market conditions.” He also added that any rate hike would be an adjustment to the degree of easing, as the real interest rate is still at a very low level.
Based on the overnight index swap, traders believe that the probability of the Federal Reserve raising interest rates at its next rate decision on December 19 is about 76%, a conclusion reached after Kuroda’s speech on Monday morning. This probability is higher than about 58% last Friday, while the probability of a rate hike in January next year has risen to about 94%.
For some time, observers of the Bank of Japan and investors have regarded Ueda’s speech in Nagoya as a potential moment for the governor to send signals. Economists and market participants have been closely watching all the recent moves of the central bank, trying to find any clues that might influence the policy direction in December or January.
Masumi Iwakura, an interest rate strategist at Nomura Securities, said: “Ueda’s remarks sounded like he was preparing for a rate hike in December. He even mentioned the government, which indicates that he has gained its understanding.”
Fumio Ohtake emphasized focusing on specific policy meetings and the decision on interest rate hikes rather than general policy discussions. This is likely a hint that the possibility of taking action at that time is on the rise. As early as January this year, Ohtake had stated that the council would decide whether to raise interest rates at the upcoming meeting, and the Bank of Japan subsequently raised interest rates later that month.
Technical analysis:
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Gold: Last Friday, our plugin alerted that when the price retraced to the demand zone around 4150, it was necessary to prepare for 1-2 long positions. So far, the outcome has been consistent with our expectations. For today, we suggest paying attention to the behavior of clearing liquidity around 4200. After that, it is recommended to start capturing the rebound signals. For detailed positions, please consult the plugin.
(Gold 15-minute chart)
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The Nasdaq: Last Friday, on-site liquidity was low, and prices have been falling continuously since the Asian market on Monday. It may test the 25,000 level. We suggest observing the rebound signal after the liquidity sweep and making 1-2 attempts. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
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Crude oil: Last Friday, we reminded that the OPEC meeting over the weekend might provide the impetus for a continued rebound. The price has returned to around the 60 level intraday. Subsequently, pay attention to the real-time momentum breakthrough signal; or wait for the liquidity near 59 to be cleared. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
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Key economic data and events to focus on today:
17:00 Eurozone November Manufacturing Purchasing Managers’ Index (Final)
23:00 US November ISM Manufacturing Purchasing Managers’ Index
