Daily Market Lookup

• Japan's yen, long favoured as a safe-haven and funding currency, has in recent weeks become so enmeshed in market speculation over central bank policy that Wednesday's decision to retain the status quo set off the steepest yen fall in nearly three years. The yen dropped more than 2% after the Bank of Japan said it was sticking to its controversial yield control policy, in defiance of market expectations of a tweak to its yield cap or other settings. Those expectations had driven a 14% rally in the yen in the past three months. In the bond market, where the central bank has battled bond bears to defend its yield cap, the BOJ has bought up so many of Japan's outstanding 10-year government bonds that market liquidity has virtually dried up. Speculators have looked instead to the yen, an easier target where their bets on BOJ policy have induced massive swings and historic levels of volatility. Moh Siong Sim, currency strategist at Bank of Singapore, said it was a question of when, not if, the BOJ shifts its ultra-dovish stance, and the market would continue to test that by pushing the yen higher. Until late last year, the BOJ's dovishness in the face of aggressive rate rises by the Federal Reserve and other major central banks meant the yen was cheap and weak, making it the perfect currency to borrow for investments But it's not so easy now, Sim said. As the yen rallied more than 15% from October's 32-year low of 151.94 per dollar to last week's peak near 127, volatility spiked. The overnight volatility priced into yen options is around a six-year high of 54%. Analysts expect bets on the BOJ soon abandoning its yield curve control policy will get bigger and louder, for a number of reasons. Some investors expect the central bank to use evidence of rising inflation and a change of the guard at the BOJ in April as an excuse to make a move. Domestic investors say the pressures of managing a highly distorted yield curve and increasing bond market dysfunction are sufficient reason for the BOJ to act. Most of that speculation has to be channelled into the yen. Even equity fund managers investing in Japan have stopped hedging their currency exposure in the hope of cashing in on yen appreciation, he said. James Athey, an investment director at fund manager abrdn, has held a long position on the yen for a while. Rises in bond yields and the yen could create a vicious tailwind of fund repatriation flows into Japan, yet some investors expect the yen's path higher won't follow a straight line. Among those watching from the sidelines are hedge funds that took a hit on their short-yen trades, which were hugely profitable for about 10 months of 2022 until a swift reversal in the yen in the last few months. Such uncertainty is also a challenge for the allocations of stock investors, who benefited from a cheaper yen last year as exports became more competitive and many Japanese companies got an earnings boost, lifting the Nikkei. Smith still sees value in Japanese assets and companies as the yen heads for 120 per dollar, or even 110, but for now he is only partially unhedged in his fund's long-short products.
• Oil prices extended gains on Wednesday as increasing optimism over a recovery in Chinese demand largely offset fears of a global economic slowdown in 2023, with the IEA’s monthly report now coming into focus The Organization of Petroleum Exporting Countries (OPEC) said in a monthly report on Tuesday that a Chinese reopening will spur a strong rebound in crude demand this year. But the cartel also left its global oil demand forecast unchanged at a rise of 2.22 million barrels per day. Focus is now squarely on a monthly report from the International Energy Agency (IEA) due later in the day. Crude markets closed higher on Tuesday after the OPEC report, also taking support from data that showed the Chinese economy grew more than expected in the fourth quarter of 2022. While economic growth in the world’s largest oil importer still shrank substantially in 2022 from the prior year, markets are betting that the withdrawal of anti-COVID measures in the country will eventually drive a strong recovery. Early road and air transport indicators from China show a sharp pickup in activity after the lifting of most lockdown measures. The country also reopened its international borders earlier in January for the first time in three years, marking a clear pivot away from the economically damaging zero-COVID policy. But markets are still uncertain over the timing of a Chinese economic recovery this year, given that the country is grappling with its worst yet COVID-19 outbreak. Fears of a global recession in 2023 have also limited gains in crude markets, amid several warnings of slowing growth in the world’s largest economies. Focus this week is also on a slew of economic indicators from the U.S., euro zone, UK, and Japan. U.S. retail sales and industrial production data, due later on Wednesday, will be of particular importance to markets, given that they lend some insight into manufacturing activity and consumer strength - two major drivers of U.S. crude demand. The dollar also recovered slightly from an over seven-month low this week, putting some pressure on commodities priced in the greenback.

Gold – XAU

Gold on Tuesday made it’s intraday high of US$1918.94/oz and low of $1903.69/oz. Gold is down by 0.315% at US$1908.48/oz.

Technicals in Focus:

In daily charts, prices are above 200DMA (1809) and breakage below will call for 1790. MACD is above the zero line and histograms are a2lso increasing trend and it will bring an upward stance in the upcoming sessions. RSI is in the overbought region and more upside is expected before it gets stretched. The Stochastic Oscillator is in neutral territory and giving a negative crossover to a bearish stance for intraday trade.

Trading Strategy: Sell on Strength

Sell below 1914-1967 keeping stop loss closing above 1967, targeting 1914-1900-1894 and 1887-1879-1869. Buy in between 1900-1879 with risk below 1879, targeting 1927-1940-1948 and 1955-1967.

Silver - XAG

Silver on Thursday made its intraday high of US$24.35/oz and low of US23.81/oz settled down by 1.417% at US$23.91/oz.

Technicals in Focus:

On daily charts, silver is sustaining below 100DMA (21.00), breakage above will lead to 21.60. MACD is below the zero line and histograms are decreasing trend and it will bring a bearish stance in the upcoming sessions. RSI is approaching the neutral region, indicating a buy signal for now. The Stochastic Oscillator is in the oversold region and gives a positive crossover to show an upside move for the intraday trade.

Trading Strategy: Buy on Dips

Buy in between 23.60-20.30, targeting 24.40-25.00-25.90 and 26.20-26.90 with stop loss should be placed on the breakage below 20.30. Sell in between 24.40-26.20 with stop loss above 26.20; targeting 23.60-23.00-22.10 and 21.70-21.30-20.70.

Oil - WTI

Crude Oil on Tuesday made an intra‐day high of US$81.48/bbl, an intraday low of US$78.92/bbl, and settled up by 2.725% to close at US$81.26/bbl.

Technicals in Focus:

On daily charts, oil is sustaining above its 20DMA i.e. 68.50 which is a support level and breakage below will call for 65.40. MACD is above the zero line and histograms are in increasing mode will bring a bullish stance in the upcoming sessions. The Stochastic Oscillator is in the neutral region, giving a positive crossover for confirmation of a bullish stance; while the RSI is in the neutral region and more upside can be expected to reach the overbought region, which is highly probable.

Trading Strategy: Neutral to Sell

Sell in between 81.20-83.40 with stop loss at 83.40; targeting 80.50-79.65-78.95 and 78.10-77.00-76.10. Buy above 80.50-76.10 with risk daily closing below 76.10; targeting 81.20-82.30-82.70 and 83.30-84.00.

EUR/USD

EUR/USD on Tuesday made an intraday low of US$1.0773/EUR, a high of US$1.0868/EUR, and settled the day down by 0.302% to close at US$1.0786/EUR.

Technicals in Focus:

On daily charts, prices are sustaining above 50DMA (1.0736), which becomes immediate support, a break below will target 1.0647. MACD is above the zero line and histograms are increasing mode which will bring a bullish view. Stochastic is in overbought territory and giving positive crossovers to the bullish outlook for intraday. 14D RSI is currently in a neutral region and giving no directions to consider right now.

Trading Strategy: Neutral to Sell

Sell below 1.0830-1.1100, targeting 1.0830-1.0790-1.0690 and 1.0650-1.0590-1.0520 with stop-loss at daily closing above 1.1100. Buy above 1.0790-1.0520 with risk below 1.0820 targeting 1.0900-1.0945-1.0990 and 1.1050-1.1100.

GBP/USD

GBP/USD on Tuesday made an intra‐day low of US$1.2168/GBP, a high of US$1.2299/GBP, and settled the day down % to close at US$1.2288/GBP.

Technicals in Focus:

On daily charts, prices are sustaining below 20DMA (1.2113) is becoming a resistance level. 14-D RSI is currently in a neutral region and direction is difficult to predict on RSI bases. The Stochastic Oscillator is in overbought territory and gives a positive crossover to confirm bullish a stance. MACD is above the zero line but histograms are increasing leading to movement.

Trading Strategy: Neutral to Buy

Based on the charts and explanations above; buy in between 1.2290-1.1890 with a target of 1.2290-1.2350 and 1.2390-1.2445-1.2290 with a stop loss closing below 1.1890. Sell in between 1.2350-1.2445 with targets at 1.2290-1.2170-1.2120 and 1.2040-1.1990-1.1890 with stop loss should be 1.2445.

USD/JPY

USD/JPY on Tuesday made an intra‐day low of JPY127.98/USD and made an intraday high of JPY129.15/USD and settled the day down by 0.292% at JPY128.08/USD.

Technicals in Focus:

In daily charts, JPY is sustaining above 200DMA (108.30), which is initial support on the daily chart. 14-D RSI is currently in the overbought region and chances of downward are expected based on RSI. MACD is above the zero line but histograms are in decreasing mode which might lead to downward movement. The Stochastic Oscillator is in neutral territory and signaling to sell as it has given a negative crossover to confirm a bearish stance.

Trading Strategy: Neutral to Sell

Sell below 131.00-133.00 with risk above 133.00 targeting 129.50-129.00-127.45 and 126.90-126.20-125.00. Long positions above 129.50-126.20 with targets of 130.40-131.10-131.60 and 132.00-132.90-134.10 with stops below 130.00.