Following a steady climb towards the upper trend-line of the strong largescale bearish channel that has been guiding the motion since mid-December 2016, USD/JPY has at last encountered solid resistance at the upper trend-line of the pattern where we will look for it to fail and start another wave south. The current candle might just be the one to put an end to the bullishness, meaning that 112.84 is likely to be out of reach for the movement to follow.
As markets expected, the US Federal Reserve left its monetary policy unchanged at its meeting on Thursday. However, policymakers signalled that "the path of gradual tightening" remained in play despite an economic slowdown registered in the March quarter. Although the Fed did not provide any clues on the timing of the next interest rate hike. Nevertheless, according to market forecasts, the next hike will likely appear in June. Solid inflation growth and the strong labour market pleased policymakers and offset sluggish economic growth. The next Fed meeting will take place on June 13-14 in Washington. Other data released on Wednesday showed that US services activity rose more than expected in April. The ISM reported its PMI for the nation's services sector came in at 57.5, up from the previous month's 55.2. In the meantime, markets anticipated a slight increase to 56.1 points in April. Earlier that day, ADP reported that US companies created 177K new jobs last month, roughly in line with forecasts. Meanwhile, March's gain of 263K new positions was revised down to 255K.
US Unemployment Claims
Turning point for USD/JPY
USD/JPY put an end to the strong climb that had been extended towards the upper boundary of the senior channel that has prevailed since mid-December 2016 with a small red candle on Thursday morning. Risks for our base scenario lie below, meaning that today is most likely to be a turning point in the motion as a break above 112.84 is very unlikely. The first level to the downside rests at 112.35 and is an appropriate target for today. In case the cross continues to stick to the upper bound of the channel, we might see some more upside potential in the future.Daily chart
Market sentiment is relatively neutral, as 57% of all open positions are short and the remaining 43% are long. At the same time, the number of orders to buy the Buck plunged from 49% to 42%.
Right now 56% of OANDA clients are bulls, losing one percent from before - the bullish sentiment has been holding around the same level for some time now. In the meantime, Saxo Bank clients barely manage to retain a positive outlook towards the US Dollar, being that 51% of their open positions are now long and the remaining 49% are short.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish on the Dollar