Translate the below html to English, keep format html, the result is not in markdown code and not break line, convert standard decode before translate: クランテックの相場分析 2023.1.23 Result: Klantek price analysis 2023.1.23

January 23, 2023

【Last Week's Market Trends】

Last week, the Bank of Japan's policy rate decision on the 18th was arguably the market's most watched event.

The outcome was a “keep current policy” and the cross-yen currencies rebounded strongly. The market had been expecting some policy tweaks, which would have supported a stronger yen and caused cross-yen pairs to fall sharply, but the BOJ brushed aside that expectation. However, within the same day the gains were erased in a swift back-and-forth, creating a volatile market with wide swings. Ultimately, on a weekly basis, cross-yen rose again by the end of the week, closing with a bullish weekly candlestick. The Nikkei stock average likewise reacted to the BOJ’s “no change” and ended the week with a solid bullish candlestick.

Next, the movements of the U.S. stocks (the three major indices) and the dollar showed no clear trend, with no significant data or statements generating a directional move.

The Dow fell quite steeply, forming a relatively large downside weekly candlestick, while the S&P 500 declined until Thursday but rebounded on Friday, closing the week with a bearish candlestick yet recovering somewhat. The Nasdaq, although small, formed a weekly candlestick with a lower wick on the bullish side. (All data are from CFDs.)

The dollar strengthened slightly against the yen and the Australian dollar, but against the euro and the pound, it closed lower, showing a mixed strength profile.

【This Week's Market Forecast】

This week, data on U.S. PMI, GDP, and December personal consumption expenditures will be released. The market is likely to react to these to some extent, but it is not expected to produce clear directional movement.

The market has already priced in another 0.25% rate hike by the U.S. Federal Reserve. Since similar remarks have come from Fed members, further reactions to rate hikes are expected to be limited. More recently, concerns about a U.S. economic slowdown have become a heavier factor for the market. Indeed, last week’s Dow movement reflects that. It seems unlikely that the pace of rate hikes will slow further in the near term, and recession concerns remain. If so, the dollar would face upward pressure while U.S. equities would face downward pressure.

So, what about cross-yen and the Nikkei? Last week, after the BOJ kept rates unchanged, the Nikkei rebounded and the yen weakened slightly. However, Prime Minister Kishida mentioned the intention to present a leadership nomination for the next BOJ governor to the Diet in February, and that a review of the joint statement with a discussion with the new BOJ governor is also possible. This implies policy revisions remain a real possibility. If so, the current Nikkei rebound and cross-yen rise could present an excellent selling opportunity.

From here, I will shift the perspective a little and analyze the market from the position movements of currency market participants that I track.

In terms of retail investor positions, which are often targeted, both cross-yen and dollar/yen and other major currencies have seen long positions decrease since around the end of last week. In other words, shorts have increased. If this trend continues, cross-yen and dollar crosses could rise in the early part of the week. This is a short-term viewpoint only.

As noted above, fundamentally the environment is prone to risk-off. If the market falls, retail investors tend to go long on value. If that happens, both the stock and currency markets could fall again.

※ This article is not investment advice. Please make your own final investment decisions. We do not accept any responsibility for damages arising from this article.