Kurantekku no souba bunseki 2023.2.13 - Navi+ - GogoJungle | Auto Trading - Market Analysis

February 13, 2023

【Market Trends of Last Week】

Last week, following reports that the next Bank of Japan (BOJ) governor candidate would be “Satoshi Amemiya” under consideration, the cross-yen pair started the week with a gap up as the market opened. Since Amemiya is currently the deputy governor and is perceived as dovish, there was a sense of relief that pushed the cross-yen higher, and the Nikkei stock average also traded a bit stronger. However, after officials such as Finance Minister Suzuki and Prime Minister Kishida made negative remarks about this matter, the Nikkei index pared its gains and the cross-yen, except for the dollar-yen, traded with limited upside.

On the 7th, there was a statement from Federal Reserve Chair Powell. The market, having been alert that the U.S. employment data released last week far exceeded expectations, feared a more hawkish stance. The content essentially included“There has been some effect on inflation from rate hikes thus far,” “Disinflation has begun, but the Fed still has more to do.”With such statements, markets felt reassured and the dollar fell, while the three major U.S. stock indices rose. However, he also noted that “employment is quite strong and further rate hikes may be needed to contain inflation,” which led to a perception that the stance shifted to hawkish, causing the dollar to rebound and U.S. stocks to retreat. Furthermore, on the 9th, multiple Fed officials echoed hawkish comments on rate hikes, pushing the dollar higher and U.S. stocks lower by the close.

And on the 10th, reports emerged that instead of Amemiya, the next BOJ governor would be “Etsuta, an economist and former BOJ policy board member.” With a different expected member than anticipated, policy outlook became more uncertain, and the cross-yen fell sharply, along with the Nikkei stock average. After an interview with Mr. Ueda, where he commented that “current monetary easing is appropriate,” the cross-yen and the Nikkei partly recovered, but the gains were weak and they closed the week with a heavy ceiling on gains.

【This Week’s Market Outlook】

This week includes the U.S. CPI release on the 14th. After that, directional cues may become clearer. If CPI exceeds expectations, the dollar is likely to rise solidly and U.S. stocks may fall. In this case, expect a modest pullback and consider going short on dollar-bloc and euro, which have recently shown signs of strength, while the Australian dollar and others may be more sensitive to stock moves. Shorting the Nasdaq, which is sensitive to interest rates, could be a primary strategy for U.S. stocks. Conversely, if CPI comes in below expectations, go long on AUD/USD and also long on Nasdaq, with medium- to longer-term expectations that U.S. inflation may linger and rate hikes may persist; if the dollar strengthens sharply, it could present an excellent selling opportunity. It could be reasonable to buy on a decline in AUD/USD and EUR/USD to short.

So what about the cross-yen and the Nikkei? These will likely be driven by news related to the next BOJ governor. Since Ueda, regarded as the potential successor, has given some statements that appear to support current policy, concerns about a rapid easing reversal have receded somewhat, yet not everything will remain unchanged. The market seems to have recognized this, so the cross-yen (excluding dollar-yen) and the Nikkei may not see substantial rebounds. The author suspects that Ueda’s recent remarks may have been mindful of BOJ Governor Kuroda, aiming to avoid market turmoil during his tenure by acknowledging current easing policies. Therefore, this week the cross-yen (excluding dollar-yen) and the Nikkei are expected to be short. The Nikkei is also expected to be short.

※ This article is not intended to prompt investment decisions. Please make your own final investment decisions. We take no responsibility for any damages arising from this article.