- 69% (80% yesterday) of all pending orders are set to acquire the Dollar
- Bulls retain substantial advantage over bears, as 59% of traders are long
- 28% of traders see USD/JPY above 124.5 by June
- Nearest significant resistance is represented by the weekly S1 and trend-line around 120.64, while closest support is the weekly S2 at 119.92
- Upcoming events: US Unemployment Claims, US Current Account, US Philly Fed Manufacturing Index, Japanese Monetary Policy Meeting Minutes
The Federal Reserve has eventually dropped its previous patient stance towards an increase of the federal funds rate. Yesterday, following the FOMC monetary policy meeting, the regulator's chair Janet Yellen indicated that the central bank is almost ready to begin raising interest rates. However, the pace of hike will be slower than initially estimated. For now, the median forecast for the federal funds rate at the end of 2015 stays at 0.625%, down from 1.125% forecasted back in December of the previous year. At the same time, the probability of a hike as soon as June increased considerably. Besides that, Yellen underlined that any movements during the next FOMC meeting in April are still unlikely. She added that abandoning the word "patient" does not automatically mean fast and unexpected decisions.
In its statement, the Federal Open Market Committee pointed out further improvements on the labour market, as economy is creating more than 200,000 jobs already for 12 straight months in a row, while unemployment is falling. The latter indicator decreased to just 5.5% last month. Taking that into consideration, many Fed officials believe the US economy is strong enough at the moment to continue growing without historically low borrowing costs.
Simon Smith, head of research FxPro, is sceptical with respect to the ability of the BoJ to boost growth and inflation. According to Simon, "the effectiveness of it [QE] diminishes the more you do, it was seen with the Fed as well." This leads to a conclusion that "the onus is still lying very much with the government; for them to push through on what they promised to do."Philly Fed Manufacturing Index, Unemployment Claims and Japanese Monetary Policy Meeting Minutes
The Philly Fed Manufacturing Index is expected to go up, while the Unemployment Claims and Current Account in the US are both anticipated to deteriorate slightly. If the data do not surprise, the Greenback is likely to outperform the Yen, while the Japanese Monetary Policy Meeting Minutes is to be the main risk event at the end of the day.
Simon Smith also does not think that the BoJ is likely to implement more stimulus before year's end. He said that the "effectiveness of it is going to be weak, the problems it is going to cause can often outweigh what it resolves". Hence, Simon suggests the onus is again going to fall on the government pushing some of the structural forms, that they have been promising and fallen short on.
USD/JPY crumbled after Fed's statement
Yesterday, the US Dollar suffered a large loss, not seen for at least a month. Despite the expectations USD/JPY dropped 125 pips amid the dovish statement of the Fed. Several significant supports failed to prevent the pair's decline, as it even tested the 119.23 level. Ultimately, the Greenback settled around the 20-day SMA. The technical studies suggest a rebound today, while closest strong resistance lies around 120.60.
Daily chart
USD/JPY pierced through the support trend-line and went below 120 yesterday. At the moment the pair is undergoing a bullish correction; however, the trend-line now acts as resistance and might prevent fast recovery.
Hourly chart
Sentiment remains bullish
Bulls retain substantial advantage over bears, as 59% of traders are long. The position of buy orders weakened. Now 69% (80% yesterday) of all pending orders are set to acquire the Dollar.
Even though not as strong as yesterday, but the sentiment among OANDA traders remains bullish: 58% of positions are long. The SAXO Group sentiment also deteriorated, the bulls now account for 57% of the market.
Spreads (avg, pip) / Trading volume / Volatility
28% of traders see USD/JPY above 124.5 by mid-May
Dukascopy Community members assume the USD/JPY currency pair is going to slump further, as more than 61% of all votes are still bearish. As predicted by the traders, USD/JPY may close around 120.1 level this Friday.
Geula4x, a member of the community, has a positive outlook towards the Buck. For him the USD/JPY pair seems quite bullish on the daily chart, and he mentioned that "the price broke above 120.48 area, which has been a previous resistance area and moved significantly higher towards 121.28 area." At the same time, Likerty, another survey participant, thinks that the US Dollar will trip against the Yen. He suggests that the Yen has no room for bullish oscillations and "a major mid-term bear correction is coming, with the 109 area in mind."