There are 3 major central banks in the global economy. This includes the Federal Reserve, the European Central Bank and the Bank of Japan. The Fed and ECB have been hawkish over the past 6 months and have altered their monetary policy via quantitative easing and interest rate alterations. The Bank of Japan so far has made no changes to its ultra-dovish monetary policy. Until now!
The Bank of Japan unexpectedly altered its yield curve control policy which gives a chance for bond yields to potentially rise going forward and also indicates possible changes to interest rates in the new year. However, traders should not confuse a yield curve alteration with an interest hike. Nonetheless, the move is potentially positive for both the currency and the Japanese bond market.
As a result of the above, the Japanese Yen increased in value by 3.50% during this morning’s Asian Session and is experiencing gains across the whole market. The Japanese Yen has been the worst performer of the year, but traders are considering whether this will change for 2023. The move has also triggered a large number of sellers for the NIKKEI225, which is a 2-month low.
Lastly, the price of Bitcoin also significantly increased in value over the past several hours and renewed its price lows. The price has increased by 3.40% and the global cryptocurrency market capitalization has also increased by 0.44%. The total capitalization is at $810 billion which is still considerably lower than previous figures but has shown positive signs today. Generally speaking, prices below $16,621 have triggered support for the digital currency within December.
NASDAQ - More Slump for Global Stocks after BOJ’s Yield Decision
The NASDAQ is declining for a sixth consecutive day and is under pressure from a global slump in the stock market and also limited demand as we approach the Christmas holidays. The price declined by 1.40% during yesterday’s session and by a further 1% within today’s futures session.
Two major factors are influencing the asset's price. Firstly, the price has been pressured by another round of interest rate hikes and also the guidance provided by most banks that interest rate hikes will continue to increase in January and February. The only regulator which had a dovish tone was the Bank of England. The Bank of Japan's hawkish actions from this morning has again added pressure to global stocks.
The increases in interest rates result in pressure on households and also consumer demand. The idea is to trigger less spending and more saving in order to lower inflation. However, this comes at a big cost for companies and the stock market. The concern is not only that the Fed is expected to hike for another 2 months, but also that they are expected to retain rates for the whole of 2023. The second issue for the latest US economic data. US Retail Sales and the Purchasing Managers’ Indexes were extremely low which is a concern for shareholders.
When looking at technical analysis, indications from both price action and indicators are signaling a decline. Potentially this may be to the previous support level of $10,760. Moving averages on most timeframes have crossed over downwards. This is also the case for MACD and the Stochastic Oscillator. Lastly, the price is still continuing to form clear lower highs and lows. The latest breakout was this morning at $11,022.
The price is also currently not being indicated as overbought, however, traders should be cautious of a change in trend after the holiday period. Currently, there are no indications of a change in trend, but traders should be prepared as equities are known to rise in January and as we approach the next earning season.
Summary:
- The Japanese Yen increased in value by 3.50% during this morning’s Asian Session.
- The Bank of Japan tweaks its bond yield curve control. Markets read this as hawkish.
- The NASDAQ declines for a sixth consecutive day and has declined by more than 7% in 7 days.
- Bitcoin climbs after prices decline below previous support levels.