- 57% of all pending orders are to sell the Buck
- 52% of all open positions are short
- USD/JPY opened at 112.78
- Upcoming events: US Unemployment Claims; US Preliminary Non-farm Productivity; US Preliminary Unit Labour Costs; US Trade Balance
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
The economic calendar shows little to watch out for on Thursday, apart from the US Unemployment claims which come out at 13:30 GMT, along with preliminary Non-farm Productivity, Unit Labour Costs as well as the US Trade Balance. While the US Unemployment data might have some impact on the pair's movements, the others are likely to not do much when it comes to volatility. Mario Draghi's speech at 17:30 GMT is also could also have some sort of impact on the currency pair.
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
The hourly chart suggests that USD/JPY might encounter another level of significance before 112.35 in the form of a junior channel boundary around 112.49, which has been leading the motion up towards the senior channel upper trend-line. The immediate resistance is located just below at 112.63 and might cause a hitch on the pair's way south. It is rather unlikely that the junior channel maintains some power as it has served its purpose of leading the rate to the top of the senior pattern.
Hourly 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
According to the poll that gathered forecasts between April 04 and May 04, traders expect the US Dollar to appreciate to 110.81 yen in three months' time, while the forecast for March 31 was 117.66 yen. It is also worth noticing that 52% of all forecasts fall under 111 yen, which is still above the current spot price. The majority of people who voted expect the US Dollar to cost somewhere between 112.50 and 114.00 or 108.00-109.5 yen in three months, with 14% of the survey participants choosing either one of these trading ranges. At the same time, the second most popular interval was the 106.500-108.00 one, with 15% of survey participants forecasting the range.