US Stocks Face Overnight Plunge on BoJ’s Rate Change: Dow Jones Dips 0.67%.

Introduction

In a whirlwind of financial uncertainty, the market faced a potential rate change by the Bank of Japan, triggering an overnight plunge in US stocks. As the Asian trading session approaches, all eyes are on Tokyo to witness the BOJ’s historic decision on its ultra-loose policy. This week has been tumultuous for traders with a barrage of data inputs and significant central bank announcements. In this article, we explore the market’s reactions, the impact on currencies like the Japanese Yen (JPY), Canadian Dollar (CAD), and Australian Dollar (AUD), and what the next 24 hours might hold.

The Asian Session Rumble

Bank of Japan Unveils Policy Shift

At 3:30 AM GMT, the Bank of Japan (BoJ) disclosed its monetary policy, opting to retain its interest rate at -0.1% and target a 10-year JGB yield near 0%. However, the most significant development came with their decision to allow rates to rise above 0.5%. To achieve this, the BoJ plans to flexibly regulate the 10-year JGB yield and modify the yield curve control (YCC). Traders responded swiftly, rushing to buy the Japanese yen, fearing potential repercussions on the yen carry trade. The USDJPY pair initially soared past 141.00 but quickly reversed, plummeting nearly 300 pips to a low of 138.10.

BOJ Governor’s News Conference

At 6:00 AM GMT, BoJ Governor Kazuo Ueda will host a news conference, possibly providing additional insights into the upcoming policy changes regarding the YCC modifications. As more of Europe comes online, demand for the Japanese yen could see further surges.

Japanese Yen (JPY) Outlook

Key Events for JPY Today

• BoJ Monetary Policy Statement
• BoJ Press Conference

The Yen’s Path Ahead

The BoJ’s decision to adjust its policies has significant implications for the Japanese yen. With the yen carrying trade at risk, traders are seeking safety in the currency. Expectations of increased demand for the yen could drive the USDJPY pair further down. It remains essential to monitor BoJ’s actions as they continue Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control, aiming to achieve a 2% price stability target. The bank’s next meeting is scheduled for September 22, 2023.

Canadian Dollar (CAD) Prospects

Key Event for CAD Today

• GDP

CAD’s Trajectory

Canada’s GDP is projected to grow by 0.3% MoM, but there are indications of a slowdown. Recent Ivey PMI figures show a deceleration in economic activity. Coupled with robust US economic statistics, USDCAD has surged beyond 1.3240, adding nearly 80 pips. Expectations of further uptrends in this currency pair dominate the day’s trading.

Bank of Canada Notes

The Bank of Canada raised its overnight rate target to 4.75%, and Canada’s first-quarter GDP growth exceeded expectations at 3.1%. Concerns have arisen about inflation remaining above the 2% target, despite the Bank’s anticipation of a temporary easing to around 3% in the summer. The next meeting is slated for September 6, 2023.

Australian Dollar (AUD) Prospects

Key Event for AUD Today

• Retail Sales

AUD’s Path Ahead

Australian retail sales fell unexpectedly below expectations in June, declining by 0.8% MoM compared to the expected 0%. May’s 0.8% gains were notably surpassed. With strong US GDP statistics and fewer US unemployment claims, the Australian dollar depreciated over 100 pips during the US session. This downward trend may persist.

Reserve Bank of Australia Notes

The RBA increased the cash rate target by 25 basis points to 4.10%. While inflation in Australia has peaked at 7%, it remains high and needs to return to the target range. Further tightening of monetary policy might be necessary. The next RBA meeting is scheduled for August 1, 2023.

Global Market Snapshot

• Asian Stock Markets: Nikkei is down 0.47%, Shanghai Composite is up 1.79%, Hang Seng is up 1.21%, and ASX is down 0.70%.
• European Equities: DAX futures are down 0.28%, CAC 40 is down 0.50%, and FTSE is up 0.26%.
• US Stock Market: Dow Jones is down 0.67%, S&P 500 is down 0.64%, and Nasdaq 100 is down 0.55%.

Commodities Update

• Gold at $1949.80 (+0.23%)
• Silver at $24.35 (-0.01%)
• Brent Oil at $83.55 (-0.31%)
• WTI Oil at $79.92 (-0.25%)

News & Data

• (AUD) Retail Sales (MoM) (Jun) Actual –0.8%, Forecast 0.0%, Previous 0.7% at 07:00
• (JPY) BoJ Outlook Report (YoY) at 08:30
• (JPY) BoJ Monetary Policy Statement at 08:30
• (EUR) German GDP (QoQ) (Q2) Actual –0.2%, Forecast 0.1%, Previous –0.3% at 13:30
• (USD) Core PCE Price Index (MoM) (Jun) Forecast 0.2%, Previous 0.3% at 18:00
• (CAD) GDP (MoM) Forecast 0.3%, Previous 0.0% at 18:00

GBPUSD

Exponential Moving Average

• EMA 5: The 5-day EMA stands at 1.2831, suggesting a bearish sentiment.
• EMA 20: The 20-day EMA displays 1.2876, reinforcing the sell indication.
• EMA 50: With a value of 1.2873, the 50-day EMA aligns with a recommendation to sell.

Simple Moving Average

• SMA 5: The 5-day SMA shows 1.2847, indicating a sell sentiment.
• SMA 20: The 20-day SMA records 1.2864, supporting the sell stance.
• SMA 50: The 50-day SMA stands at 1.2913, signifying a sell indication.

RSI (Relative Strength Index)

The RSI, calculated over a 14-day period, displays a reading of 39.78, suggesting a negative signal.

Stochastic Oscillator

The %K value of the Stochastic Oscillator suggests a negative condition.

Resistance And Support Levels

• Resistance: The resistance level is identified at 1.2833.
• Support: The support level is observed at 1.2755.

Summary And Trade Suggestions

Based on the technical analysis, GBP/USD presents a sell outlook. Traders may consider entering a short position, considering the indicators, moving averages, and oscillators.

Trade Suggestion

• Entry Point: 1.2735
• Take Profit: 1.2641
• Stop Loss: 1.2806

EURUSD

Exponential Moving Average

• EMA 5: The 5-day EMA stands at 1.0998, indicating a sell signal.
• EMA 20: The 20-day EMA is at 1.1066, signaling a selling sentiment.
• EMA 50: The 50-day EMA currently sits at 1.1064, suggesting a sell indication.

Simple Moving Average

• SMA 5: The 5-day SMA shows a value of 1.1013, reinforcing the sell recommendation.
• SMA 20: With a value of 1.1081, the 20-day SMA also supports a sell sentiment.
• SMA 50: The 50-day SMA registers at 1.1088, affirming a sell indication.

RSI (Relative Strength Index)

The RSI, calculated over a 14-day period, stands at 28.45, signifying a negative signal.

Stochastic Oscillator

The %K value of the Stochastic Oscillator suggests a negative stance.

Resistance And Support Levels

• Resistance: The resistance level is observed at 1.0990.
• Support: The support level is identified at 1.0942.

Summary And Trade Suggestions

In summary, the technical analysis of EURUSD points towards a sell sentiment. Considering the indicators, moving averages, and oscillators, it seems favorable for traders to enter a short position.

Trade Suggestion

• Entry Point: 1.0919
• Take Profit: 1.0861
• Stop Loss: 1.0966

AUDUSD

Exponential Moving Average

• EMA 5: The 5-day EMA stands at 0.6695, indicating a sell signal.
• EMA 20: The 20-day EMA is at 0.6742, signaling a sell sentiment.
• EMA 50: The 50-day EMA currently sits at 0.6745, suggesting a sell indication.

Simple Moving Average

• SMA 5: The 5-day SMA shows a value of 0.6719, reinforcing the sell recommendation.
• SMA 20: With a value of 0.6751, the 20-day SMA also supports a sell sentiment.
• SMA 50: The 50-day SMA registers at 0.6749, affirming a sell indication.

RSI (Relative Strength Index)

The RSI, calculated over a 14-day period, stands at 35.71, signifying a bearish signal.

Stochastic Oscillator

The %K value of the Stochastic Oscillator suggests a negative stance.

Resistance And Support Levels

• Resistance: The resistance level is observed at 0.6695.
• Support: The support level is identified at 0.6622.

Summary And Trade Suggestions

In summary, the technical analysis of AUDUSD points towards a sell sentiment. Considering the indicators, moving averages, and oscillators, it seems favorable for traders to enter a short position.

Trade Suggestion

• Entry Point: 0.6603
• Take Profit: 0.6541
• Stop Loss: 0.6655

USDJPY

Exponential Moving Average

• EMA 5: The 5-day EMA stands at 139.60, indicating a sell signal.
• EMA 20: The 20-day EMA is at 140.51, signaling a sell sentiment.
• EMA 50: The 50-day EMA currently sits at 140.53, suggesting a sell indication.

Simple Moving Average

• SMA 5: The 5-day SMA shows a value of 139.64, reinforcing the sell recommendation.
• SMA 20: With a value of 140.47, the 20-day SMA also supports a sell sentiment.
• SMA 50: The 50-day SMA registers at 140.33, affirming a sell indication.

RSI (Relative Strength Index)

The RSI, calculated over a 14-day period, stands at 43.20, signifying a neutral signal.

Stochastic Oscillator

The %K value of the Stochastic Oscillator suggests a negative stance.

Resistance And Support Levels

• Resistance: The resistance level is observed at 139.44.
• Support: The support level is identified at 138.71.

Summary And Trade Suggestions

In summary, the technical analysis of USDJPY points towards a sell sentiment. Considering the indicators, moving averages, and oscillators, it seems favorable for traders to enter a short position.

Trade Suggestion

• Entry Point: 138.39
• Take Profit: 137.39
• Stop Loss: 139.30

HANG SENG

Simple Moving Average

• SMA 5: The 5-day SMA shows a value of 19726.80, reinforcing the buy recommendation.
• SMA 20: With a value of 19278.75, the 20-day SMA also supports a buying sentiment.
• SMA 50: The 50-day SMA registers at 19059.32, affirming a buy indication.

RSI (Relative Strength Index)

The RSI, calculated over a 14-day period, stands at 67.11, signifying a positive signal.

Stochastic Oscillator

The %K value of the Stochastic Oscillator suggests a neutral stance.

Resistance And Support Levels

• Resistance: The resistance level is observed at 20078.
• Support: The support level is identified at 19742.

Summary And Trade Suggestions

In summary, the technical analysis of Hang Seng points towards a buying sentiment. Considering the indicators, moving averages, and oscillators, it seems favorable for traders to enter a long position.

Trade Suggestion

• Entry Point: 20186
• Take Profit: 20468
• Stop Loss: 19980

WTI CRUDE OIL

Exponential Moving Average

• EMA 5: The 5-day EMA stands at 79.32, indicating a buy signal.
• EMA 20: The 20-day EMA is at 78.06, signaling a buy sentiment.
• EMA 50: The 50-day EMA currently sits at 76.04, suggesting a buy indication.

Simple Moving Average

• SMA 5: The 5-day SMA shows a value of 79.43, reinforcing the buy recommendation.
• SMA 20: With a value of 77.92, the 20-day SMA also supports a buy sentiment.
• SMA 50: The 50-day SMA registers at 75.84, affirming a buy indication.

RSI (Relative Strength Index)

The RSI, calculated over a 14-day period, stands at 70.58, signifying a buy signal.

Stochastic Oscillator

The %K value of the Stochastic Oscillator suggests a neutral stance.

Resistance And Support Levels

• Resistance: The resistance level is observed at 79.63.
• Support: The support level is identified at 78.64.

Summary And Trade Suggestions

In summary, the technical analysis of WTI Crude Oil points towards a sell sentiment. Considering the indicators, moving averages, and oscillators, it seems favorable for traders to enter a short position.

Trade Suggestion

• Entry Point: 79.91
• Take Profit: 80.62
• Stop Loss: 79.49

GOLD

Exponential Moving Average

• EMA 5: The 5-day EMA stands at 1955.34, indicating a sell signal.
• EMA 20: The 20-day EMA is at 1960.73, signaling a sell sentiment.
• EMA 50: The 50-day EMA currently sits at 1954.61, suggesting a sell indication.

Simple Moving Average

• SMA 5: The 5-day SMA shows a value of 1956.99, reinforcing the sell recommendation.
• SMA 20: With a value of 1963.99, the 20-day SMA also supports a sell sentiment.
• SMA 50: The 50-day SMA registers at 1952.00, affirming a buy indication.

RSI (Relative Strength Index)

The RSI, calculated over a 14-day period, stands at 44.16, signifying a neutral signal.

Stochastic Oscillator

The %K value of the Stochastic Oscillator suggests a negative stance.

Resistance And Support Levels

• Resistance: The resistance level is observed at 1951.58.
• Support: The support level is identified at 1942.10.

Summary And Trade Suggestions

In summary, the technical analysis of gold points towards a sell sentiment. Considering the indicators, moving averages, and oscillators, it seems favorable for traders to enter a short position.

Trade Suggestion

• Entry Point: 1935.23
• Take Profit: 1913.46
• Stop Loss: 1951.12

ETHEREUM

Exponential Moving Average

• EMA 5: The 5-day EMA stands at 1884.57, indicating a sell signal.
• EMA 20: The 20-day EMA is at 1889.73, signaling a sell sentiment.
• EMA 50: The 50-day EMA currently sits at 1897.03, suggesting a sell indication.

Simple Moving Average

• SMA 5: The 5-day SMA shows a value of 1888.47, reinforcing the sell recommendation.
• SMA 20: With a value of 1886.24, the 20-day SMA also supports a sell sentiment.
• SMA 50: The 50-day SMA registers at 1911.00, affirming a sell indication.

RSI (Relative Strength Index)

The RSI, calculated over a 14-day period, stands at 44.76, signifying a neutral signal.

Stochastic Oscillator

The %K value of the Stochastic Oscillator suggests a negative stance.

Resistance And Support Levels

• Resistance: The resistance level is observed at 1904.96.
• Support: The support level is identified at 1871.27.

Summary And Trade Suggestions

In summary, the technical analysis of Ethereum points towards a sell sentiment. Considering the indicators, moving averages, and oscillators, it seems favorable for traders to enter a short position.

Trade Suggestion

• Entry Point: 1848.81
• Take Profit: 1803.90
• Stop Loss: 1885.56