Boom goes the dynamite. USD/JPY literally exploded after Kuroda announced BOJ’s Bold Easing Moves. Price stopped the bearish sequence and punched into the 94.6 – 96.6 consolidation area directly. Doubts were still lingering initially as market has a tendency of fading BOJ’s announcement rallies. 3 hours after the announcement, bullish momentum was clearly slowing down and threatened to gave way during the next candle period. However, instead of reversing back just under the 95.6 interim resistance, price broke higher despite US Initial Jobless claims coming in much higher than expected – a news announcement that should usually result in stronger Yen due to safe haven flows. Despite ADP Employment and Continuing Claims both coming out worse than expected, it seems that USD/JPY bulls remain unfazed and remain focused on Kuroda’s promise of a better Japan future.
3 Hourly Chart
Price has since cleared the 96.7 high back in March, which is also the 2013 peak and price levels since Aug 2009. There is some weakness seen once again at current levels similar to observations back below at 95.6. Interestingly, despite price breaking to new highs, Stochastic reading is still slightly below peak readings of March. Readings are still pointing higher rather than lower, which suggest that current momentum may have some more legs to run.
Daily chart shows the largest candlestick body since the beginning of the rally. With Stochastic reading at the beginning of a bull cycle, a confirmation of bullish breakout may be possible to bring the rally since Sep ’12 back on track. Price has also cleared the rising trendline, adding to current bullish bias.
The question that we have now is simply – how far can USD/JPY go? Kuroda seems bent on continuing weakening Yen to bring Japan to reach the inflation target, and it is clear that market is continuing to lend Kuroda trust, despite the current initiatives being less impressive as compared to the 2014 package. Looking at the manner which price rallied – spreading over 24 hours to move 300+ pips rather than the big jump that we’ve seen before (e.g. 30th Oct 2011, 16th Mar 2011). Current rally seems less of a fundamental push but rather continued speculative actions on future BOJ policies. If this hypothesis is true, then Kuroda will need to keep his game face on every single meeting from now in order to maintain bullish momentum higher. Also, this would mean that a shift in global risk appetite may reduce speculative actions and allow safe haven flows to return, pushing USD/JPY once again.
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