Market Focus

U.S. equities recovered in the final hour of trading on Thursday to cap a choppy session in the green as investors continued to digest a hawkish print of minutes from the last FOMC meeting. The S&P 500 shifted losses to rise 0.4%, and the Dow Jones climbed roughly 0.3% after plummeting over 300 points in the first half of the session. The Nasdaq Composite bounced back from a dip of more than 1% to close just above breakeven.

In most of the world, ETFs are simply tools that allow investors to track a certain set of stocks. In Japan, they’ve been saddled with everything from propping up the market and boosting inflation, to accelerating economic growth, improving corporate governance and even encouraging gender equality.

Such wide-ranging goals have led the Japanese central bank to amass a whopping 80% of the country’s ETFs—equivalent to about 7% of its $6 trillion stock market—in less than a decade. That’s far further than any other central bank in the world has gone in trying to prime its economy via equities purchases. The Bank of Japan has also outpaced peers with its $3.7 trillion in net bond purchases.

But nine years and a few hundred billion dollars worth of ETF purchases later, the most striking consequence of the world’s boldest monetary experiment may be catastrophic: The BOJ is stuck with a vast portfolio it might not be able to get rid of.

BOJ Chair Haruhiko Kuroda remains tight-lipped about an exit plan as he prepares to step down in 2023. The tricky task of offloading the BOJ’s position without sparking a major selloff in stocks will now fall to his successor. Doing so may take decades, if not generations. Already the biggest stock market intervention in central bank history, it has prompted criticism that it has failed to live up to the hype.

Main Pairs Movement

Sentiments are still dismal as attention remains on central banks’ hawkishness and tensions between the Kremlin and the western world. The US has increased its actions against Moscow, hitting Russian Sberbank and Alfa Bank and prohibiting investments in the country by American companies. The EU, in the meantime, has backed a Russian coal embargo, although without officially confirming it. The dollar remained robust.

On Thursday, Ukraine presented a new agreement proposal, which includes discussing the situation of Crimea and Donbas, something that Russia considers unacceptable. Meanwhile, the European Central Bank has released the accounts of its latest meeting. The document showed that policymakers believe the bond-buying program has now fulfilled its objective, and by ending it in the summer, it would clear the way for a 3Q rate hike.

At the time of writing, the Euro pair is trading around 1.0870 while Cable stands at 1.3070. The dollar appreciated against its safe-haven rivals, with USD/CHF trading at 0.8340 and USD/JPY near 124.00. Commodity-linked currencies shed some ground, with AUD/USD down to 0.7470 and USD/CAD up to 1.2585.

Gold is changing hands at $1,934 a troy ounce, up for a third consecutive day higher 0.33%. Crude oil, on the other hand, has continued sliding at the start of Friday, with WTI trading at $96.40 at the time of writing and Brent at $100.80.

Technical Analysis

AUDUSD (4- Hour Chart)

AUDUSD continues to retreat, now nearly 200 pips lower since Tuesday’s hawkish RBA. On the four-hour chart, AUDUSD is on the last defensive point to remain in its bullish stance. Failure to defend the immediate support level at 0.7471 will bring the currency pair to the next level at 0.7432. On the upside, with the RSI is nearly oversold and the MACD is edging on the midline, the Aussie might find a decent level of support at 0.7471 or the psychological support at 0.7400. The acceptance above 0.7536 will help AUDUSD regain strength. Further price action eye on the tension between Russia and Ukraine and the sanctions from both the US and the EU.

Resistance:  0.7536, 0.7640, 0.7700

Support: 0.7471, 0.7432

Nasdaq 100 (Daily Chart)

The Nasdaq 100 continues to edge lower for a third day at the time of writing following the Fed signalling a speedier policy tightening plan. From the technical perspective, the outlook of the Nasdaq 100 remains on the upside in the near term as the MACD remains positive. At the moment, the MACD is on the edge of crossing, implying that if the Nasdaq 100 fails to defend the current support pivot at 14486, then it will accelerate further south.  On the flip side, the index needs to climb above 15689 in order to reclaim its bullish trend in the longer term.

Resistance: 14486, 15024, 15689

Support: 13948, 13283

EURUSD (4- Hour Chart)

EURUSD erased early gain on Thursday as the tensions are mounting in France’s presidential election race. A Le Pen victory can potentially drag the euro down. From the technical aspect, the outlook of the EURUSD pair remains bearish as it continues to trade in the lower bound of the Bollinger band. In the meantime, falling below the 20 and 50 Simple Moving Averages also shows that EURUSD is adding another bearish layer. The RSI indicator and the MACD both continue to fall in the negative territory, meaning the absence of dip-buying. Overall, the risk sentiment is sour as the crisis in Ukraine sees no end, boosting the safe- heaven, the US dollar.

Resistance: 1.0969, 1.1069, 101150

Support: 1.0806