- The share of buy orders slid from 70 to 48%
- 74% of traders hold long positions
- The 55-day SMA, the monthly PP, the weekly R1 and the down-trend around 112.30 represent immediate resistance
- Support is around 110.30
- 66% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: US GDP Annualized, US GDP Price Index, US Jobless Claims
The US Dollar experienced mixed performance, but with gains or losses being rather mild. The FOMC Statement turned out to be just as the Fed anticipated, as there was no significant effect on the USD crosses. The Greenback dropped only 0.25% against the Swissie and 0.23% versus the Euro, while remaining relatively unchanged against the Loonie, down 0.04%. At the same time, barely notable gains of 0.13% and 0.26% were registered against the Yen and the Sterling, respectively. Nonetheless, a dovish RBNZ statement caused the NZD/USD currency pair to edge 0.89% lower, while a poor reading of Australian CPI caused the AUD/USD to plunge 2.07%.
The Fed opted not to hike interest rates and remained ambiguous about raising rates in June amid moribund economy and weakening consumer spending. The US central bank proceeded with its plan to move cautiously on raising the benchmark federal-funds rate, which has been between 0.25% and 0.50% since December, when the Fed increased short-term rates after keeping them near zero since 2008. Policy makers pointed that the US economy is performing robustly in some respects, but continuing to falter in others. Household spending has diminished even though real income has increased and consumer sentiment remains high, while the labour market conditions have improved further.
The Fed's caution underlines how policy makers still lack confidence they can move away from extraordinary easy-money policies without derailing the fragile US growth and knocking the global economy off balance. The seven weeks until the June meeting could help determine how many times, if any, the Fed will hike short-term interest rates this year. Policy makers will get two months of inflation and labour-market data as well as two estimates of first-quarter growth before their next meeting. One major source of uncertainty for policy makers is the UK's referendum over whether to leave the EU, which is scheduled for June 23, a week after the Fed meets.
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.
US GDP Annualized, US GDP Price Index and Initial Jobless Claims
On Thursday there are no significant economic data releases from the UK side, thus, attention should be paid to the US data. First of all, the US GDP Annualized, which is released by the US Bureau of Economic Analysis, shows the monetary value of all the goods, services and structures, produced within a country in a given period of time. GDP Annualized is a gross measure of activity because it indicates the pace at which a country's economy is growing or decreasing. Second, the GDP Price Index, which gauges the change in the prices of goods and services. Changes in the GDP Price Index are followed as an indicator of inflationary pressure that may anticipate interest rates to rise. Finally, the US Jobless Claims – 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 labour market. A larger than expected number indicates weakness in this market, which influences the strength and direction of the US economy.USD/JPY suffers from BoJ decision
The FOMC statement had no effect on the USD/JPY currency pair yesterday, as the exchange rate remained relatively flat for the second day in a row. The BoJ statement today, however, had a devastating effect on the pair, strengthening the Yen and causing the pair to drop to the 109.00 major level, where the weekly S1 coincides with the monthly S2. This cluster is the final frontier before the Greenback falls back towards the 18-month low of 107.63. A disappointing US GDP reading today could provide sufficient impetus for such a drop, while a good reading is likely to contribute to a recovery, pushing the Buck above the 110.00 mark.Daily chart
Upon reaching the weekend's high of 111.90, the USD/JPY currency pair slumped dramatically, now making its way towards the 18-month low of 107.63. A failure to regain the bullish momentum would only cause the Greenback to establish a fresh 18-month low, while the 19-month one lies at 105.19.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 65% of open positions are long, compared to 64% on Wednesday. The sentiment as reported by SAXO Bank barely remains bullish - 52% of currently open positions are long, two percentage points less from Wednesday.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to rise above 114 yen
More than half of the surveyed (66%) now assumes that the US Dollar is to cost more than 114.00 yen after three month time. The most popular choice implies that the Greenback is to cost somewhere between 114.00 and 115.50 yen in three months, selected by more than a quarter (29%) of the voters. According to the votes collected between March 28 and April 28, the mean forecast for July 28 is 113.75. At the same time, 23% of the surveyed believe the Greenback could cost between 115.50 and 117.00 yen in three months.
At the same time, for the third straight week, around 80% of respondents are having bullish view on the pair.
Meanwhile, Trendmaster, a trader with the Dukascopy Community, is bullish on the USD/JPY currency pair. "The USD/JPY trend is uncertain as both central bank from US and Japan are meeting this week. The BoJ is widely expected to cut its policy rate by 20bp to -0.3% and scale up its qualitative easing measures." He also commented that from the technical and trend view, despite the negative rate, he expects market sentiment to keep the pair bearish through the week.
On the other side of the barricade, Jignesh believes that the USD/JPY pair might end up with a significant loss. "Last week's price action on the back of an announcement from the BoJ showing some renewed commitment may have traders looking at this pair with the view that the longer term up trend may have continued. Dips should be supported in this pair as it gets bought up further this week", he commented.