Is the 100.0 dream truly over? Price has broken the rising trendline, signalling a bearish breakout after BOJ has confirmed that it will not engage in any more stimulus activity after Friday’s rate decision. Price is now on its way of forming an Eve-Eve double top with 96.6 level eyed. If the level is broken, acceleration towards the downside may occur until 94.3 is reached.
The 94.3 – 96.6 consolidation may provide some support, and give hope to remnant bulls that are still interested in a 100.0 push. Despite the fact that moving below 96.6 will weaken the long-term uptrend pressure significantly, uptrend is not really broken until 92.0 and confluence with 161.8% Fib extension is broken. Before that has occurred, bulls may be hoping that a repeat of early April bullish revival may happen around 94.3.
However, fundamentals were starkly different back then for the revival to happen – BOJ Governor Kuroda was scheduled to make his first rate decision as the head honcho, and market was waiting in high anticipation for the big stimulus package that Kuroda has promised earlier. This time round, there wasn’t much fan fare on the latest BOJ rate decision as traders were already pre-warned by Kuroda himself that they are done with stimulus for now. According to Google Trends, interest in BOJ has fallen way short for the latest decision making, with the early April meeting hitting historical high interest levels. It is hard to imagine high speculative actions that can drive USD/JPY higher.
That being said, expect USD/JPY to be well supported with risk appetite growing. Despite all the woes the world is facing now – China growth slowdown, Europe Financial Crisis, US March weakness – the US stock market remains strong. This will continue allow Yen, the traditional safe haven currency to weaken. Nonetheless, one must seriously question this correlationship between Yen and risk appetite especially after Yen has weakened to such an extend, ignoring risk trends during early months when US stocks suffered 2 major pullbacks.
Hourly Chart shows price on its way after its own breakout from 98.5 on Friday, with the bullish correction unable to breach the descending trendline nor the 98.5 level once again. Early Monday trading session sees price breaking Friday’s low and continuing the bearish breakout. Some interim support (not shown on Chart) around 97 – 97.3 have been spotted, but should bearish momentum continue at this pace, it will not be surprising to see the interim supports broken without much fight.