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USD/JPY Continues to Carve Lower-Highs Despite Japan Ratings Cut

USD/JPY Continues to Carve Lower-Highs Despite Japan Ratings Cut

Talking Points:

- USD/JPY Retail Crowd Increases Long Exposure as Fitch Cuts Japan’s Credit Rating.

- GBP/USD Near-Term Advance Vulnerable to Weak 1Q Gross Domestic Product (GDP) Report.

- USDOLLAR Outlook Mired by Slowing Recovery- Bearish RSI Momentum in Focus.

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USD/JPY Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Even though Fitch Ratings cut Japan’s credit-rating to A from A+, USD/JPY remains at risk for a further decline as it continues to carve a series of lower highs & lows, while the RSI retains the bearish momentum.
  • Despite bets for a further expansion in the Bank of Japan’s (BoJ) JPY 80T/month asset-purchase program, may see the fresh developments coming out of the policy meeting improve the appeal of the Japanese Yen should Governor Haruhiko Kuroda endorse a wait-and-see approach.
  • DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long USD/JPY as the ratio sits at +2.63, but seeing a decline in open interest heading into the end of April.


GBP/USD Daily Chart
  • Despite the weaker-than-expected data series from the Consortium of British Industries (CBI), GBP/USD pushes to fresh monthly highs to threaten the bearish RSI momentum carried over from 2014.
  • Nevertheless, the British Pound may face near-term headwinds as the 1Q Gross Domestic Product (GDP) report is expected to show the U.K. economy growing an annualized 2.6% after expanding 3.0% during the last three-months of 2014.
  • With the ongoing series of higher highs & lows, the next topside region of interest comes in around 1.5340 (78.6% retracement) to 1.5350 (50% retracement).

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index11886.6911945.7411884.18-0.2186.93%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar pushes to fresh monthly lows as the ongoing series of weaker-than-expected data prints drag on Fed interest rate expectations; will continue to favor downside targets as a bearish setup takes shape.
  • Bearish RSI momentum continues to highlight the risk for a larger correction in USDOLLAR especially as the softening recovery dampens the Fed’s scope for a June rate hike.
  • Close below 11,899 (61.8% retracement) to 11,901 (78.6% expansion) to open up the next downside targets around 11,828 (78.6% retracement) to 11,836 (61.8% retracement).

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Markit Purchasing Manager Index- Services (APR P)13:4558.857.8
Markit Purchasing Manager Index- Composite (APR P)13:45--57.4
Dallas Fed Manufacturing Activity Survey (APR)14:00-12.0-16.0

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--- Written by David Song, Currency Analyst

To contact David, e-mail Follow me on Twitter at @DavidJSong.

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