BoJ shocks, indices performed major bullish reversal

Tuesday was all about the Yen. The Asian session ended with a rapid strengthening of the Japanese currency, all thanks to the Bank of Japan. What happened? Well, the Bank of Japan widened the allowed trading band for 10-year Japanese government bonds (JGBs) by 25 bps – 10y JGBs can now trade between -50 bps and +50 bps. While this might not seem like a big deal, the market tends to think different.

USDJPY finished the day with a 3.7% drop, EURJPY with a 3.6% and GBPJPY dropped 3.4%. Wednesday morning brought us a small correction and all the above-mentioned currencies are trading slightly higher. JPY was by far the strongest currency yesterday. NZD and AUD, on the other hand, ended up the weakest again. The NZD index is dropping almost 0.5% today – the biggest drop among the major currencies, confirming its spot among the weakest ones yet again.

Tuesday brought us the rise of the Yen, as well as bullish candles on Commodities. WTI oil enjoyed a 1.1% upswing, while silver climbed 4.6% higher. Precious metals were doing really great yesterday – palladium rose 4.2%, platinum 2.5%, and gold finished 1.5% higher than Monday. The weaker USD definitely helped, but we cannot say that it was the only trigger playing a role here.

Tuesday was definitely a game-changer for the indices. During the session, we went deep down the buyers’ defense lines. They managed, however, to perform a counterattack, which in most cases created a beautiful hammer candle on the daily chart. A hammer is a candle with a small body and a long tail. It shows us rapid rejection of the lower levels and a counterattack of demand. This can be a start of a new bullish wave, and thus it is not surprising at all that most of the indices are currently rising and the opening in Europe is green.

The calendar today shall only be important for the Canadian Dollar. We will discover the inflation number that is expected to remain unchanged. Later during the day, CB Consumer Confidence data from the US are to be published, which can also spark some volatility.