Nikkei 225 traded sharply lower during midday Asian trade due to BOJ affirming the market what we already suspected all along – not doing anything more to current stimulus package in this round of Monetary Policy decision making. There was no mentioning on any new initiatives or expansions of current plans, with the same figures being touted again. However, price did not collapse all the way on this lack luster showing from BOJ, but instead bounced back higher after the hitting interim support around 13,250.
This should come off as no surprise, as Kuroda et al have been telling the market that they are done with both quantitative and qualitative easing in 2013. The plans have been laid, and it will remain as it is. This stance was reiterated even after USD/JPY went below 100.0, and Nikkei losing more than 3,500 points from May highs to June lows. Therefore, any bearishness that should result from an inactive BOJ would/could/should have been priced in long ago, which explains why price remains slightly bullish in the short-term chart despite the confirmation of the inactivity that everybody kinda knew before.
From a technical perspective, the ability to stay above 13,400 – near the levels of Monday’s post GDP data rally – is a good sign that bias remains to the upside for this week. Nonetheless, the failure to retest topside consolidation above 13,550 will continue to weigh. Given long-term bearish outlook, if short-term bullishness is unable to extend current run, the risks of price reversing heavily downward increases. Stochastic readings is hinting at such a possibility – readings are currently pointing lower once more but a cross with Signal Line has not yet happened, lending weight to the downside risk mentioned earlier, and once again suggesting that a break above 13,550 will be essential to alleviate concerns.
Monthly chart shows the big reversal that has happened since the start of the month, with bulls successfully trading back above the 50.0% Fib and the 13,000 mark. Currently Price Action remains slightly bearish, but should current monthly candle becomes a bullish Hammer (especially if closing price is higher than the body of last month’s candle) the pressure of current Shooting Star bearishness will be negated, which means the bullish pressure from Nov 2012 rally is back again.
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