- The portion of orders to buy the US Dollar declined from 62 to 51%
- Today 74% of all open positions are long
- The weekly S3, the monthly S2 and the Bollinger band around 108.80 represent immediate resistance
- Support is at 107.67
- 56% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events: US Wholesale Inventories, FOMC Member Dudley Speech, Japanese Core Machinery Orders, US Import Prices, US Federal Budget Balance
The US Dollar managed to appreciate against most major currencies on Thursday, but still suffered a rather significant decline against the Japanese Yen. The USD/JPY edged 1.44% lower, amid the return of risk aversion, triggered by BoJ Kuroda's statement, while the USD/CHF remained completely unchanged over the day. At the same time, a decline in oil prices caused commodity-based currencies to weaken against the US Dollar, with the AUD/USD slumping 1.25%, NZD/USD falling 0.70% lower and the USD/CAD climbing up 0.43%. Against the Sterling and the Euro the Buck managed to add 0.47% and 0.18%, respectively.
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.
Quiet Friday
Neither today nor on Monday there are significant economic data releases scheduled during those days. However, next Tuesday attention should be paid to the US Import Prices. The Import Price Index released by the US Department of Labor informs the changes in the price of imported products into the US. The higher the cost of imported goods, the stronger the effect they will have on inflation, redunding in a higher probability of a rate rise. The second event that day will be the US Federal Budget Balance. The Monthly Budget Statement released by the Financial Management Service summarizes the financial activities of federal entities, disbursing officers, and Federal Reserve banks. A positive budget statement that receipts exceed budgetary outlays is seen as bullish for the USD.USD/JPY attempts to regain the bullish momentum
As was anticipated, the USD/JPY currency pair slumped after BoJ Kuroda's statement yesterday, with the exchange rate reaching a fresh 18-month low of 107.67. However, the Buck stabilised slightly higher at 108.17, after having plunged for five days in a row. The newly-formed 18-month low is expected to provide sufficient support to keep the Greenback from falling deeper. Technical studies remain retain mixed signals, suggesting that the US currency might rebound today, if demand at the new low provided sufficient impetus for the recovery. In this case, the nearest resistance will be the cluster around 108.75, represented by the weekly S3, the monthly S2 and the Bollinger band.Daily chart
The USD/JPY currency pair breached the support line on Thursday, but managed to begin its recovery in the second half of the day, upon reaching a new 18-month low. Even if price returns above the down-trend, risks of more downward pressure are now higher.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 65% of open positions are long, compared to 64% on Thursday. The sentiment as reported by SAXO Bank remains bullish - 60% of currently open positions are long, down from 58% on Thursday.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 114 yen
The majority (56%) 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 20% of the voters. According to the votes collected between March 08 and April 08, the mean forecast for July 08 is 112.88. At the same time, 12% of the surveyed believe the Greenback could cost between 117.00 and 118.50 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."