Market reacts positively then negatively to BOJ stunner

Markets excited-not by BOJ monetary policy

Summarised by foreXlive ‘BOJ to create new program to buy ETFs in three-part easing shocker

BOJ drops an absolute bomb

Get your yen selling on!

  • BOJ to buy ETFs in new program
  • To extend average duration of JGB purchases to 7-12 years
  • To purchase ETFs composed of stocks issued by firms active in investment in CAPEX and human resources
  • BOJ to begin new program from April 2016
  • To extend growth lending programs by one year
  • No change in 80T yen annual monetary base expansion
  • Will change JREIT program
  • BOJ voted 6-3 to establish new ETF program
  • Voted 6-3 on JREIT program
  • 6-3 vote on maturity extension
  • Dissents from Ishida, Sato and Kiuchi across the board

The market is slow to react at first because Bloomberg messed up the headline.

IN my opinion, market was happy that the Japanese Government will own stocks which means Nikkei will never have meaningful correction which means stock investors are protected species. Then market became unhappy because the decision was not unanimous. 

 

Spike kills bulls and bears alike

In the meantime, very interesting price action from stock market and forex. First chart N225 15 minute. Mind you 19150 spike to 19884 and back is the equivalent of 3.8% up and then 3.8% down. With a leveraged account, this is how entire fortunes can be won… and lost.

N225 15 minute chart

N225 15 minute chart

Put in higher time frame context we can see how first shorts were brought to a shaving and then followed by a bull slaughter. Wash n rinse, price re-tests December open. The good thing is with this spike, we know truly where resistance is.

N225 daily chart

N225 daily chart

Finally for USDJPY, the pair retraces, slams into 6-week high. Depending on how it closes for the week, I have to remind everyone that this pair is in the vicinity of 122 which if broken below, could lead to a year-year reversal of USDJPY in favour of JPY strengthening. Perhaps this failure to rally N225/cheapen JPY is a signal that Japanese QE is no longer effective.

USDJPY daily chart

USDJPY daily chart

Also reminder that we were looking at AUDJPY short in our private post yesterday.

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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005. Soh Tiong Hum is a member and regular speaker at Technical Analysts Society Singapore events and has a bi-monthly lunch time event at IG Singapore on forex and stock markets. He is an avid blogger on technical analysis topics; his Twitter account @sohtionghum was ranked #23 out of The Top 70 Twitter Accounts To Follow In 2015 by MahiFX. Come find Tiong Hum on Google+
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