- The number of buy orders added one percentage point, and now they account for 62% of the market
- Long positions retreated to their Tuesday's level of 70%
- 19% of traders expect USD/JPY within the 121.50-123.00 price range, and the same percentage believes the pair to be between 123.00 and 124.50 in three months
- Nearest resistance rests around 120.70, represented by the Bollinger band, while closest support lies around 119.90, represented by the weekly R1
- Upcoming events: US Unemployment Claims, US FOMC Member Lacker Speech, US Import Prices
Fed officials remained divided on the timing of the first interest rate lift-off in almost a decade, the official account of the FOMC's March meeting showed. Policy makers were considering a wide range of possible rate hike dates with some of them still believing the meeting in June as an appropriate time to begin normalizing monetary policy. Others, however, favoured the first increase in the federal funds rate since the financial crisis to come later in the year as they remained unsure about how long energy-price declines and a stronger Greenback would distort inflation data. There were also a number of policy makers, who argued that the world's biggest economy would not be ready for tighter policy until 2016. The disagreement could present a challenge for Fed Chairwoman Janet Yellen in the months ahead. Yellen led officials to a unanimous decision in March to drop a pledge to be "patient", the change which effectively opened the door to rate increases by midyear. Yet tough decisions now loom about whether to move then.
Hours before the release of the FOMC meeting minutes, Fed Board of Governors member Jerome Powell said the US central bank will hike interest rates later this, but highlighted that the timing of the rate hike is less important than the path of further rate increases. Powell outlined the need to ensure that lift-offs should be gradual, given the world's number one economy "continues on its expected path".
An analyst from CMC Markets, Collin Cieszynski, said that "the US Dollar has had a massive rally over the last six months or so on expectations that the Fed would start raising interest rates, with most of the Street expecting that they would start at their June meeting." However, Collin indicates that the situation has changed recently, commenting that "there have been signs," such as: "at the last Fed meeting a number of Fed members lowered their forecast for GDP, inflation, and Fed fund, suggesting they were starting to back away a bit from their interest rate normalisation programme." The analyst concludes that "this shortfall in employment is another nail in that coffin, because the Fed has a mandate of keeping inflation under control and also boosting employment, so it is hard to see how they are going to start raising interest rates if employment is actually falling in the US."
Andrew Grantham, senior economist in CIBC World Markets, says that an increase in prices in the United States is unlikely to accelerate, at least on the core level and probably even on the headline level, "given that we have seen some further decline in oil prices since the end of February." According to him, it is improbable that year-view rates of inflation are going to get any stronger in the near-term (next 2-3 months). Still, "in terms of Fed policy, as long as they [headline and core inflation] do not decelerate significantly, they [the Fed officials] could still be looking to hike in June."
US Unemployment Claims
Today, the Department of Labor is to release data on the Jobless Claims in the US. The number of claims is expected to increase by 15,000. It is a sign of consumer spending deterioration, hence the impact on the Buck is to be negative.
USD/JPY suffers a minor setback
USD/JPY fell down yesterday, but not as hard as expected. Even though the Greenback tested the support cluster around 119.6, in the end it stabilised over the 120 level. The monthly PP prevented the pair from extending the losses; however, a risk of a further decline exists. The technical studies suggest a bearish bias, and the 120 barrier is likely to be breached today. Meanwhile, nearest significant support lies around 119.73.
Daily chart
The GBP/USD has seemingly formed an ascending channel. However, judging by the previous fluctuations, the support trend-line might be pierced by the end of the week, and this will invalidate the pattern.
Hourly chart
Bulls slightly retreat
Long positions retreated to their Tuesday's level of 70%, while the number of buy orders added one percentage point, and now they account for 62% of the market.
Sentiment of OANDA's traders slightly improved, as 58% of positions are now long. The SAXO Group participants' outlook is as positive as OANDA's, bulls take up 58% of the market.
Spreads (avg, pip) / Trading volume / Volatility
19% of traders expect USD/JPY between either 121.50-123.00, or 123.00 and 124.50 in three months
The mean forecast for July 9 is 121.32. However, the majority of survey participants (57%) expect the Greenback to cost more than 121.50 yen after a three-month period. The most popular choices are 121.50-123.00, and 123.00-124.50, both chosen by 19% of the surveyed. The second place is taken by the 124.50-126.00 interval, voted for by 14% of traders.
This week the pair's sentiment changed considerably, as now 80% of all votes are bearish. The average expectation for April 10 stays just above the 118.60 level.
Pipx, one of the community participants, has a bullish outlook towards the US Dollar this week. He commented that "a trend line on the recent lows shows a strong bullish trend." However, TradeWizard, another survey participant, worked his magic and shared his bearish view on the USD/JPY pair. In his opinion "the pair was unable to break the barrier of 120.50, and it is slowly falling down." As a result, his short-term prediction is bearish.