© Dukascopy Bank SA
USD/JPY became one of the most weak currency crosses for the previous week. During the previously observed period, the Japanese yen corrected slightly from three-week lows as the Federal Open Market Committee left the Federal Reserve's interest rate untouched at 0.50% at Wednesday's meeting. Meanwhile, the US economy lost some momentum in recent weeks, FOMC representatives confirmed in the statement, even though they showed no sign of giving up on the ambition to gradually continue raising rates this year. The next day, traders were awaiting the Bank of Japan meeting, which was supposed to be the main driver for the pair. Later in the day, the yen briefly benefited from weaker US data showing decreased demand for durable goods during the New York session. Nevertheless, at the end of the week, the Japanese yen suffered a steep downfall by almost 300 pips early in the Asian session as the Bank of Japan surprisingly cut the policy rate into negative territory. This move is aimed at increasing lending, spurring growth and generating inflationary pressures.
However, traders are getting more optimistic about the pair, as the proportion of optimists advanced to 75% this week from almost 45% a week earlier. The consensus forecast stands however, for 120.7. Some of the traders even believe the advance can be even more impressive, with Jignesh saying "An unexpected rate cut from BOJ caught everyone by surprise. Several market participants who were waiting patiently for good levels to look at short positions, will now be buying dips in this pair. Upside resistance at 2015 highs." Meanwhile, almost all of the traders think the pair will show new level of highs.
© Dukascopy Bank SA