- 58% of all orders are to acquire the Greenback
- Slightly less than three quarters (74%) of all positions remain short
- The 55, 100 and 200-day SMAs around 121.60 are the nearest resistance
- Immediate support is around 120.87, represented by the monthly S1 and the Bollinger band
- 57% of the survey participants expect the US Dollar to cost more than 123.00 yen in three months
- Upcoming events today: US Final GDP, US Existing Home Sales
The Buck declined against most major currencies on Friday and over the weekend, but managed to appreciate 0.04% against the Sterling and 0.14% versus the Loonie. The USD/JPY dropped 1.14%, after the BoJ announcement on Friday, while the AUD/USD edged 0.65% higher. The Greenback also lost 0.36% versus the Kiwi, 0.38% against the Euro and 0.40% versus the Swissie.
The Bank of Japan surprised market participants by announcing its intentions to increase purchases of exchange-traded funds and prolonging the maturity of bonds it buys to boost investment in the economy. Under the new programme, the central bank will purchase ETFs at an annual pace of 300 billion yen composed of stocks issued by companies "proactively" investing in physical and human capital. The new ETF purchase programme will start in April and will build up the current ETF purchase programme of around 3 trillion yen annually. The central bank said after its December monetary policy meeting it would initially target ETFs that track the JPX-Nikkei 400 index, which features companies that promote transparency and good governance. The BoJ's new ETF program is aimed in part at offsetting the possible market impact of the central bank's sales of stock it has bought from financial institutions since 2002, according to the BoJ statement. It plans to take 10 years to sell those shares at a pace of around 300 billion yen annually.
The BoJ also decided to extend the duration of the Japanese government bonds it buys from 10 to 12 years from 2016. Meanwhile, the central bank held rates steady and said it will stick to its plan to increase the monetary base by 80 trillion annually, as expected.
In response to the latest Bank of Japan meeting, Stuart Allsop, head of financial market strategy at BMI Research, said that no action from the central bank was expected and that they are likely to "refrain from doing any more stimulus this year". However, he noted that "the risks have increased".
Raig Erlam, senior currency analyst with OANDA, considers that more stimulus from the BOJ is "inevitable", but it is the timing that is yet uncertain. Erlam expects the central bank to hold off this week, but he thinks that "at some point towards the end of the year we may start to see the message being conveyed through to the market that stimulus is coming".
Concerning the GDP growth, the BMI Research analyst doubts that it will "get above 1% anytime in the foreseeable future". The reasons for this are manifold. First, there is "a huge headwind in terms of demographics". Additionally, there is a decline in growth of China coupled with global economic slowdown. However, the main negative factor provided by Allsop is a "very unstable production structure". He explains that the real interest rate is negative, which is "sending contradictory signals to the real economy", and this in turn leads to a low chance of "a productivity boom
As for the Japanese Yen, Allsop is bullish on the currency. In his opinion there are two main contributing factors. The first one is that "investors lose faith in the willingness of the BoJ to act. At the same Allsop adds that the Yen has proven recently its status as a global safe have, and this is beneficial for the value of the currency being that "global financial markets are looking quite shaky", which is negative for the risk sentiment. At the same time, the analyst mentioned that USD/JPY "may fall quite significantly in the coming months", and if this is the case, "this would raise the prospects of intervention from the BoJ."
Another quiet Monday
No significant data releases are scheduled for Monday, shifting all focus on Tuesday's fundamentals. From the US side the Final GDP or the Annualized GDP is due. The Gross Domestic Product Annualized is released by the US Bureau of Economic Analysis and 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 market activity because it indicates the pace at which a country's economy is growing or decreasing. No changes in the GDP are expected, compared to the previous value. Meanwhile, from Japan no data is expected until Thursday..
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Raig Erlam, senior currency analyst at OANDA, reckons that this week's FOMC statement will be "the Fed's last opportunity to convince the market that rates are still on course to be raise this year". In case they exclude this message from the statement, then "they are not going to raise rates this year and we are probably looking more towards the middle of the next year".
USD/JPY under the risk of falling below 121.00
The tough cluster around 121.60 was unsuccessful at holding the losses last Friday, resulting in a slump to 121.14. Today the mentioned cluster is providing resistance, but gains could extend above that group of levels, as it failed to limiting volatility previously. According to technical studies, the US Dollar to decline again today; however, the monthly S1 was able to keep the USD/JPY afloat in December and is likely to do so again today, as it is reinforced by the Bollinger band. Meanwhile, the 55-day SMA crossed the longer period ones, providing a signal to buy the Buck.Daily chart
Since the beginning of last week the USD/JPY has been edging higher, with the up-trend confirmed on Friday and today. However, the pair is now inching closer to the down-trend above 122.00; it is yet uncertain which line is to prevail in direction the USD/JPY price.
Hourly chart
Bears dominate the market
OANDA and SAXO Bank are similar in the share of their long and short positions. The portion of bulls in the market of the Canadian-based broker improved today, namely from 62 to 66%; while the long and short positions at SAXO Bank now take up 55% and 45% of the market, respectively.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the rate to stay above 123 yen
The majority of forecasts appear to be centered around the 124.50 price level. However, more than a half of traders (59%) believe the US Dollar will cost less after a three month period. The most popular price intervals are 123.00-124.50 and 124.50-126.00, both selected by 16% of the voters, whereas the second most popular choice is the 117.00-118.50 one, chosen by only 12% of the surveyed. The mean forecast for Mar 21 is 122.95.