Key Points:
-
Dollar bulls largely disappointed by FOMC meeting.
-
RSI Oscillator still has room to move on the downside.
-
Continued depreciation likely but watch for a Dollar rebound in the near term.
The USD/JPY had a relatively torrid week as the pair was beset by a negative greenback sentiment swing following the FOMC decision. The central bank’s lack of hawkish guidance was the main culprit and this sent the pair sharply lower to close the week over 200 pips lower at 112.69. However, it remains to be seen how the pair will cope in the coming week as the veritable bevy of FOMC pundits hit the wires to shape the markets expectations.
Last week was highly negative for the USDJPY as the pair fell sharply as the U.S. Fed’s decision on interest rates hit the wires. Although the central bank followed through on the expectation of rate hikes, and raised the FFR 25bps to 1.00%, they failed to signal the start of the expected cycle of tightening. Subsequently, Dollar bulls were caught short footed and the appetite for the greenback immediately leaked out of the market. Subsequently, the USDJPY slipped over 200 pips to close the week well down at 112.69. The Fed decision also largely overshadowed a relatively poor JPY Core Machinery Orders result which fell into contraction at -3.2% m/m.
The week ahead is likely to focus sharply on a range of speeches that are due out from the U.S. Federal Reserve, with the market’s interest largely falling on what Janet Yellen has to say. Given the turmoil that the greenback has seen over the past few days, it’s all but assured that the Fed’s PR machine will be out in force to stabilise market expectations. Subsequently, expect to see plenty of volatility as the Fed moves into `Jaw Boning’ mode. On the Japanese side, the Trade Balance figures are also due out early in the week but are unlikely to provide much in the way of movement for the pair.
From a technical perspective, price action’s recent dip below the 100 day MA appears to be beckoning in a move to the short side. In addition, the RSI Oscillator is trending sharply lower and still remains firmly wedged within neutral territory suggesting that there is still room to move. Subsequently, our initial bias is bearish for the week ahead with the caveat to watch for a rebound around the 111.61 mark. Support is currently in place for the pair at 112.55, 111.61, and 110.61. Resistance exists on the upside at 113.74, 114.75, and 115.50.
Ultimately, the pair retains its bearish predilection and it will take a significant boost from all of the FOMC member speeches due out in the next week to stem the tide. However, note that the greenback is unlikely to stay depressed for long, so be prepared for a rebound at some stage lest you get caught out.
Risk Warning: Any form of trading or investment carries a high level of risk to your capital and you should only trade with money you can afford to lose. The information and strategies contained herein may not be suitable for all investors, so please ensure that you fully understand the risks involved and you are advised to seek independent advice from a registered financial advisor. The advice on this website is general in nature and does not take into account your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances. The information in this article is not intended for residents of New Zealand and use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Knight Review is not a registered financial advisor and in no way intends to provide specific advice to you in any form whatsoever and provide no financial products or services for sale. As always, please take the time to consult with a registered financial advisor in your jurisdiction for a consideration of your specific circumstances.
Recommended Content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold price sits at all-time highs above $2,230, US PCE eyed
Gold price hit all-time highs at $2,236 on Thursday to finish Q1 2024 with a bang. Most major world markets, including the US are closed due to Holy Friday, leaving volatility around Gold price highly subdued. US PCE inflation and Powell are awaited.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.