It was an expected win for Abe and after securing his 2/3 majority seat in parliament, called the diet, will it be a continuation of Abenomics? Well, we shall be on the sidelines observing and waiting for a topping fair value of the USDJPY before another leg of Yen bulls jump in. There are a couple of likely events going forward. One of them is the confidence that the people of Japan have on Abe meaning that the planned consumption tax hike scheduled for 2019 shall happen. Another is Kuroda’s contract extension as the head of BoJ. The latter is particularly important after last year’s BoJ’s yield curve control bearing in mind that the Yen is sensitive to the US 10 year bond yield which is still stuck below 2.5%. The more it remains depress, the better it is for the Yen and Gold in this case. These two have a positive correlation as safe haven assets. In the US, the planned tax reforms is on course, the USD looks likely to gain especially now that there is improvement in the labor market and Fed fund trackers are placing a 98% chance of a rate hike.
In the Gold chart, bulls should be in charge at least maybe to the psychological $1300 per ounce level. That is where bulls should place their take profit because there is a buy signal and a strong bullish engulfing pattern in the 4 hour chart. After last week’s bear run, my expectation is a 50%-60% market correction with my upside at last Monday’s high at $1300. Since the bull momentum is still on in the monthly chart, buy entries in this time-frame make sense.
I will advise traders to place their positions as follows;
Stop Loss: $1270
Take Profit: $1300
Have a good trading day.