Will the Dovish Tone from Shinichi Uchida Help Calm the Market?
Macro theme:
- The BoJ's 0.25% rate hike last Wednesday, the highest in 15 years, sparked a global stock rout. The surge in the low-yielding yen, widely used for acquiring high-yielding assets like stocks, led investors to unwind their positions in currency carry trades.
- Global equity markets rebounded after BoJ Deputy Governor Shinichi Uchida stated that the central bank would not raise interest rates during financial instability. This assurance pushed the yen lower and boosted market sentiment.
- It is crucial to remember that panic sell-offs are often short-lived. Historically, markets have rebounded as new funding sources emerged. Currently, significant funds are parked in banks as cash or treasury bills, poised to invest in high-quality assets affected by the global panic.
Technical theme:
- USTEC recovered from its key support around 17300 and bounced back to close near its resistance at 18440. The index broke its ascending channel and closed well below both EMAs, indicating a potential mean reversal.
- If USTEC closes above 18440, the index may retrace further to retest both EMAs and the broken ascending channel before resuming downward movement.
On the contrary, if USTEC cannot close above 18440, the index may retest support around the 17000-17300 area.
- The BoJ's 0.25% rate hike last Wednesday, the highest in 15 years, sparked a global stock rout. The surge in the low-yielding yen, widely used for acquiring high-yielding assets like stocks, led investors to unwind their positions in currency carry trades.
- Global equity markets rebounded after BoJ Deputy Governor Shinichi Uchida stated that the central bank would not raise interest rates during financial instability. This assurance pushed the yen lower and boosted market sentiment.
- It is crucial to remember that panic sell-offs are often short-lived. Historically, markets have rebounded as new funding sources emerged. Currently, significant funds are parked in banks as cash or treasury bills, poised to invest in high-quality assets affected by the global panic.
Technical theme:
- USTEC recovered from its key support around 17300 and bounced back to close near its resistance at 18440. The index broke its ascending channel and closed well below both EMAs, indicating a potential mean reversal.
- If USTEC closes above 18440, the index may retrace further to retest both EMAs and the broken ascending channel before resuming downward movement.
On the contrary, if USTEC cannot close above 18440, the index may retest support around the 17000-17300 area.
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