Photo - Andreas Zanin
Andreas Zanin
Analysis, Market Analysis | December 21, 2022

JASPER’S MARKET SQUAWK 21-12-2022

Markets try to digest BOJ’s decision

The BOJ’s decision significantly affected the dollar and how global markets moved on Wednesday. JGB yields rose to an 8-year high, with the DXY dropping to a 6-month low and metals rising.

Key factors for today:

  • Yen posts largest gain since 1998, current in correction
  • Gold supported by dollar weakness, spending talks
  • Crude prices little impacted by weather leading up to Xmas
  • ECB’s Villorey says no hard landing in EU, no recession in France
  • DJIA, Nasdaq lifted marginally from FedEx, Nike

Yen corrects in early trading

After posting the largest daily gain since 1998 yesterday following the BOJ’s surprise policy change, the yen entered a bit of correction. USD/JPY hit a double bottom at 130.50, with resistance comfortably away at 133.60. Asian indices fluctuated as investors digested the implications of the BOJ’s move.

Gold 0.51% higher on a weaker dollar

Further reverberating to the BOJ’s surprise move, the dollar traded on the back foot and supported gold and other precious metal prices. Congress advanced talks on a $1.7T spending bill, which could elevate inflation. Gold prepares for a breakout past $1825/oz, eying $1850/oz net unless it reverses towards $1800/oz. Shares of Australian gold miners rocketed higher, pulling the ASX index up.

Large storm headed for most of US

WTI was supported after the National Weather Services forecast a winter cyclone affecting most of the US over the coming days, with extreme cold weather conditions lasting until Christmas. It comes after a storm in the northeast left heavy snow over the weekend, leaving 200K customers without electricity for hours. Still, crude trades within a tight range between $74.50/oz and $77/oz.

ECB’s Villeroy: Does not see a hard landing

Francois Villeroy said during a press interview that some uncertainty about the sharing economy’s outlook had been lifted, suggesting it would avoid a hard landing. Markets could have interpreted this as a dovish stance. EUR/USD has support and resistance at $1.0580 and $1.0660, with a breakout imminent.

FedEx, Nike support risk appetite

The two major firms reported after the market close, with Nike beating estimates handily. FedEx cut its outlook, but not to package delivery volumes, which offered some relief to investors worried that retail sales might slump in the coming months. Nasdaq and DJIA were seen a little up.

On the docket

  • US 30-year mortgage rate
  • CPI inflation in Canada
  • CD consumer confidence and home sales
  • EIA crude oil and natural gas inventories

FX 1-day relative performance (USD)

  • Kiwi under pressure in 0.68% drop
  • Yen 0.27% weaker in corrective mode
  • Pound 0.20% down vs greenback
  • Aussie 0.14% in the red
  • Euro somewhat unchanged vs USD
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