Japan – Trade Balance
On Sunday, at GMT 11:50 p.m., the Japanese Ministry of Finance released the month-over-month national trade balance figure, which measures the difference in value between the total imported and exported goods over the last month. This data is usually reported by being seasonally adjusted in order to gauge the true changes in the trade balance situation of Japan.
The demand for a nation’s currency is directly correlated to the export it makes minus the net imports because foreigners must convert their currency to Yen in order to pay Japanese exporters. Hence, binary options traders and market analysts consider the trade balance to be a leading indicator of a currency’s strength.
In December, the Japanese trade balance figure came out at -0.93 trillion (yen) and for the forecast for this month was set at -0.74 trillion. The actual figure, however, came out slightly better compared to what the binary options traders were expecting, at -0.71 trillion.
Europe – German Ifo Business Climate
On Monday, the Ifo Institute for Economic Research released the German version of its business climate index, which measures the changes in the level of a composite index created by surveying 7,000 manufacturers, builders, wholesalers, and retailers in the given country.
Binary options traders highly respect the Ifo Business Climate index because any large deviation in the index figure tends to create substantial impact on the price of the Euro. This is primarily because of the large sample size of the survey as well as the large share of the German economy in the overall Eurozone.
In December, the German Ifo business climate index reading came out at 105.5 and the forecast for January was set at 106.7. The actual figure came exactly what the binary options traders were expecting, at 106.7, indicating no large deviation happened this month.
Trade Recommendation for the EUR/JPY
Since breaking the uptrend line on December 30, the EUR/JPY has fallen sharply and formed a steady downward sloping trend line in the process. When last week the European Central Bank declared that they were starting a quantitative easing program of 60 billion Euros per month, similar to the US Federal Reserve, the price of EUR/JPY plummeted and the support level around 135 was broken.
The QE program will help boost inflation in the Eurozone, which indicates increased economic activity. The confidence in the Eurozone economy was reflected by this month’s German Ifo business climate index as well, which increased to 106.7, 1.2 points higher than last month. However, from a technical point of view, the EUR/JPY has to break above the sharp downward sloping trend line before it can move any further up. Also, the current trend may push the EUR/JPY to a new low before we would see any substantial retracement up to the resistance level around 135.
Under the circumstances, it is highly recommended that binary options traders look for opportunities to place only PUT orders with the EUR/JPY, unless it breaks above the down trend line. A suitable exit target would be around 124.5, which is the 161.8% extension level of the previous upward swing on the daily chart.
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