Crantec Market Analysis 2023.2.20
February 20, 2023
【Last Week's Market Trends】
Last week, US CPI, retail sales, and PPI all released stronger-than-expected results, and further hawkish remarks about rate hikes from Federal Reserve officials came out late in the week. While this prompted a strong dollar rally, the major US stock indices (hereafter, US stocks) entered a range-bound pattern with heavy downside after the CPI release on the 14th, forming a long upper wick on the weekly chart.
The yen and the Nikkei stock average were in focus on the policy stance of the incoming Bank of Japan Governor Ueda, and there were also statements indicating a willingness to allow current easing, which gave the market a temporary sense of relief. The dollar/yen rise also helped, and cross-yen pairs broadly advanced. On the other hand, despite expectations for continued easing and the accompanying yen depreciation, the Nikkei stock average showed a very heavy top and ended the week with a small bearish candle on the weekly chart.
【This Week's Market Forecast】
This week, there are several indicators likely to elicit market reactions, such as US PMI, existing home sales, GDP, and PCE. Unless these results fall short of expectations, the dollar is expected to remain firm. There are no other factors likely to push it down. The FOMC minutes will also be released, but based on last week’s Fed official remarks, it seems unlikely there will be any content that would cause the dollar to fall. It seems prudent to target retracements (dollar pullbacks) in EURUSD, GBPUSD, and AUDUSD rather than continuing to buy the dollar outright. Looking at the weekly chart, GBPUSD and AUDUSD look particularly weak. Regarding US stocks, a continued short strategy is advisable.
Additionally this week, Japan will hold the confirmation hearing for the incoming BOJ Governor Ueda on the 24th. This is another focal point for the market. Regarding easing policy, the stance is largely in agreement with the current policy, but the key point will be whether there is any mention of YCC (Yield Curve Control). If the hearing yields even a slightly negative remark on this, cross-yen would move sharply lower (yen appreciation), and the Nikkei stock average would drop from its previous sideways trend. However, since Mr. Ueda has emphasized a focus on market communication, there is a strong possibility that no statements will cause a major market move during this hearing. If so, cross-yen (excluding USDJPY) and the Nikkei may continue trading in a range for a while longer.
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