- The number of orders to acquire the US Dollar increased up to 62%
- Bullish traders' sentiment remains unchanged at 73%
- The weekly S2 at 110.12 represents immediate resistance
- Support is around 109.56
- 55% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events: US Jobless Claims, US Consumer Credit, Fed Chair Yellen Speech, Japanese Current Account
The US Dollar suffered against most major peers on Wednesday, amid a dovish FOMC Meeting Minutes statement. The largest loss was registered against the Australian counterpart (0.72%). At the same time, the USD/JPY fell 0.50%, as the Japanese Yen was boosted by the return of risk-off sentiment. The Buck also dropped 0.37% and 0.31% against the Loonie and the Kiwi, respectively, while remaining relatively unchanged against the Euro, edging 0.13% lower, and the Swissie, falling down 0.03%. The only gain of 0.27% was seen versus the British Pound, as ‘Brexit' fears continued to weigh on the Sterling.
Bank of Japan Governor Haruhiko Kuroda reiterated the central bank's readiness to take additional monetary easing steps if needed to reach its 2% inflation goal. BoJ Governor Haruhiko Kuroda's comments come more than two months after the central bank adopted a negative interest rate strategy aimed at stemming deflationary expectations and spurring a revival in demand. Kuroda said that the BoJ would take additional easing steps in the form of quantity, quality of asset buying, or interest rates if needed.
The BoJ has been conducting Qualitative and Quantitative Easing programme for three years now, but so far the scheme showed little success in boosting inflation to the 2% target level. Kuroda expected Japan's consumer inflation to hover around its current level of zero for some time before accelerating to 2%. Japan's national core CPI was flat in February, while Tokyo's CPI dropped 0.3% on an annualized basis in March, the steepest decline since QQE began. Recent economic data suggest the world's third-biggest economy is making little progress in creating the 'virtuous cycle' the BoJ hopes for, with the economy shrinking 0.3% in the December quarter, largely due to a decline in consumer demand.
Vatsal Srivastava, director at the Blackwater Consulting, explains why the US Dollar is a advancing against the Yen this week. Even though he says that there was nothing fundamentally driving USD/JPY on Monday, one of the key drivers is the falling oil prices, which is actually boosting the Yen, in his opinion, as there is an addition cause for more QQE. Vatsal Srivastava also mentions that "it is going to be a hard economic ride ahead and there seems to be no light on the horizon for Japan as of now". "Lets hope for the best," he added.
Yellen's speech is the main event today
There are several events concerning the US that are due later today. First of all, the Initial Jobless Claims, released by the US Department of Labor, is a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labor market. A larger than expected number indicates weakness in this market which influences the strength and direction of the US economy. Second, the Consumer Credit, released by the Board of Governors of the Federal Reserve, is an amount of money that individuals borrowed. It shows if consumers can afford large expenses, which can fuel economic growth. However, a high figure may also indicate that the economy is overheating, as consumers borrow in order to live beyond their means. Finally, the Fed Chair's speech is due closer to day's end. As a head of the central bank, she has most influence over the nation's currency value than any other person. She is expected to comment on yesterday's FOMC Meeting Minutes and provide insight concerning future interest rate hikes.USD/JPY plunges after Kuroda's statement
Dovish Fed statement caused the USD/JPY currency pair to drop more than 50 pips lower, therefore, completely breaking out of the descending channel to the downside. The Buck is likely to prolong its decline, after BoJ Kuroda's comments earlier today triggered another Yen buying spree, also bolstered by the return of risk aversion. Even though the Bollinger band is the closest support, the cluster around 110.70 is much stronger. However, bears might push the Greenback beyond this support area, with the pair establishing a fresh 18-month low.Daily chart
The US Dollar weakened against the Japanese Yen for another day and suffered an even sharper decline earlier today, which caused the bearish support line to be pierced. This now opens the door for the USD/JPY pair to keep falling towards the 105.17 level, namely the October 2014 low, unless BoJ intervention occurs.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 64% of open positions are long, compared to 66% on Wednesday. The sentiment as reported by SAXO Bank remains bullish - 58% of currently open positions are long, down from 64% on Wednesday.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 114 yen
The majority (55%) now assumes that the US Dollar is to cost less than 114.00 yen after three month time. The most popular choice implies that the Greenback is to cost somewhere between 106.50 and 108.00 yen in three months, selected by 22% of the voters. According to the votes collected between March 07 and April 07, the mean forecast for July 07 is 113.00. At the same time, 24% of the surveyed (equally divided) believe the Greenback could cost either between 117.00 and 118.50 yen or even between 118.50 and 120.00 yen in three months.
Dukascopy Community members grew more bearish towards the USD/JPY currency pair, being that 60% of traders are now short the US Dollar and the remaining 40% are long.
Panzer, a trader with a bullish outlook towards the USD/JPY currency pair. "The USD/ JPY is moving in a small range and it is clear that the USD will continue to strengthen in the future", he commented.
Meanwhile, megajorko, another trader with the Dukascopy Community, believes that the US Dollar is to edge lower against the Yen. He said that "the Yen is gaining power and after the USD weaknesses I am expecting that the downward channel will continue. Although, the possibility still remains that pair will return to 120 level."