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Dollar and Yen Crosses Threatening Full-Blown Bear Trends

Dollar and Yen Crosses Threatening Full-Blown Bear Trends

John Kicklighter, Chief Strategist

Talking Points:

  • The BoJ's decision to hold its policy bearings lead to one of the steepest USDJPY declines in recent history
  • With key pairs like USDJPY and EURJPY probing support, focus should turn to the S&P 500 for intention
  • After the non-committal Fed decision, tepid US GDP pushed USDollar to its lowest level in 10 months

See how retail traders are positioning in the majors using the FXCM SSI readings on DailyFX's sentiment page.

The Yen crosses were upended by the Bank of Japan's decision to hold steady on its accommodative monetary policy. With USDJPY leading with one of its biggest declines in recent history, key pairs stand on the verge of technical levels that threaten a more systemic bear trend. At 107.25, USDJPY faces the 38.2% Fib of the range representing the entirety of the BoJ QQE influence - from anticipation to peak impression. For the more fundamentally unbalanced EURJPY, the mid-point of this BoJ era range stands at 122. An erosion in the market's belief that central banks can control exchange rates has played a crucial role in pushing these pairs to current levels. However, escalation may require something more systemic such as market-wide risk aversion. The S&P 500 is listing heavily in its multi-month bull trend, but we have yet to see conviction shift. Meanwhile, the disappointing US 1Q GDP reading built on the response to the Fed's neutrality with the weakest pace of growth in two years. USDollar is pushing 10-month lows, and key pairs face important technical levels. Will one of these key market themes finally trigger an avalanche? We take the market's temperature in today's Trading Video.

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