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"The risk was the BOJ was going to do something, markets had to price in the probability of a surprise easing, so a shock move up in the yen. Now that risk is gone, so people can take off their hedges"
- Citigroup (based on Bloomberg)
Pair's Outlook
USD/JPY is still considered to be unable to clear out a downtrend resistance at 79.80, which should carry on weighing on the currency couple, limiting its rallies. Accordingly, being that the market respects this line, subsequent development is likely to result in further depreciation of the US Dollar relative to the Japanese Yen. Therefore the long term target of the pair lies at 77.04/76.94.
Traders' Sentiment
The overwhelming majority of market participants (74%) keep bullish trades on USD/JPY, regardless of the pair being in a downtrend for more than a month. Presumably, traders expect the price to bounce off a support in the near term. At the same time the Japanese Yen is the least frequently bought currency, as merely 26% of all the trades involving it were to buy the Yen.
© Dukascopy Bank SA