USD/JPY: Bulls Aiming 111.00 Level

USD/JPY posted strong growth on Monday with daily gains of + 1.44%. The pair broke the important area at 107.50/107.80 and marked fresh high at 108.52.  

The Yen was influenced by the positive GDP data and Kuroda’s speech, who pointed that the inflation will rise slowly and monetary policy will not change until inflation reaches the target of 2%. Meanwhile Fed’s rate hike in December is also relevant to the pair with expectations have risen sharply after Trump’s win. 

Technically speaking, bulls are now fuelled to continue slowly upwards and test the next key resistance level at 111.00/111.60. RSI and Stochastic are placed now at overbought territory with the pair breaking the 200-day moving average, which is pointing that correction is not excluded. 

A new chapter is about to be written

The week ahead is expected to be exciting as the major event that will run the markets is the US presidential elections. The first data from the elections will be released (09:00 GMT) and inevitably will impact to the financial markets not only in the US, but in Europe and Asia as well. 

Theoretically and in general terms in case of Hillary Clinton win this would bring more predictability in both foreign and domestic policy in the United States. Clinton’s campaign  was largely predicting a continuation of Obama’s economic policy with some slight additions. This will increase US dollar’s strength against the yen, Swiss franc and the euro.

Donald Trump's intentions in foreign policy and the economy so far are not very clear. Therefore in case of win, that suggests that the US dollar will fall against other major currencies.

Who will be the new US president is of great importance for the energy sector in the US. Hillary Clinton’s victory would lead to shrinking of oil production, since her vision is that we must give priority to renewable energy sources. Donald Trump favors the traditional sources of energy and if he becomes president, the expected oil production in the United States will be maintained or increased - which will affect the price of the "black gold".

USD/JPY plummeted right after FBI reopenes Clinton’s mail case

Few hours before the end of the week markets tumbled. Only 10 days left to US elections and FBI reopened Clinton’s mail case. The news flashed into the market space and immediately affected the main currencies.

Since the beginning of October USD/JPY was moving higher and reached a 3 week high at 105.52. Last two days the pair is seen in consolidation phase around 105.00 level.

After the FBI story was posted, the pair plummeted and fell from 105.35 to 104.45 for just several minutes. Meanwhile the main indices at Wall Street and the equities also were significantly down. 

This story rocked the market mood, but 10 days is a lot of time. Outside the elections, next week promises to be interesting. High volatility is expected on Wednesday, when Fed and BoJ will declare their solutions on monetary policy.

USD/JPY retreated back to 102 handle on BoJ's statement

Earlier this morning BoJ presented the new policy framework and announced that will keep the main interest rate unchanged as well as the ETF purchases amount and the bond-buying program. New measures will be implement to control the yield curve together with QE and reaching the target of 0% in 10 yr bond yield.

Ahead of BoJ’s Kuroda speech USD/JPY slipped below the bullish channel, but after digesting the comment the pair pushed higher again. Looking to the downside, a clear break and daily close below 101.15 could lead the bears to 100.00 - 99.50 area. Immediate resistance is seen at 103.36 and if closing above 103.00 bulls may try to test it. Anyway key resistance level remains near 104.00. Currently the bearish scenario is preferable, but nothing is sure as higher volatility is expected to spur the markets this evening with Fed’s statement. 

USD/JPY in anticipation of FOMC meeting

USD/JPY was quite hesitant yesterday. The pair tried to push lower, formed bottom at 105.62 but closed higher at 106.09. Currently the pair is staying above 106 mark and hit an intraday high at 106.41 earlier today. In the short term bulls may try to conquer 106.70 - 107.00 area. On the downside, key support is located at 106.00 - 105.50 levels.

More clear direction will be set later on today, as the market is anticipating Federal Open Market Committee meeting. Still the expectations are that the monetary policy will not be changed. Tomorrow the Bank of Japan will decide on monetary policy and what measures should be taken against the appreciating yen.

Mario Draghi’s speech overwhelmed the markets

The euro erased its initial losses after European Central Bank (ECB) President Mario Draghi hinted that it is not expected a further reduction of key interest rates in the eurozone.

Surprisingly the massive new stimulus measures taken by the European Central Bank at today's meeting led for a short time to a drop in the euro to 5-week lows at 1.0822 dollars and 0.7652 pounds. The single currency managed to hit a weekly low at 1.0891 swiss franks and dropped to hourly day low at 123.65 Japanese yen.

But the following  comments by ECB governor Mario Draghi that he does not expect a further reduction in key interest rates led to a sharp rebound of the single currency to a two-week high of 1.1115 dollars. Meanwhile, the euro rose to a one week high of 0.7797 pounds to three-week high of 126.24 Japanese yen.

The initial euphoria of the European stock markets caused by today's decision of the ECB to undertake a series of aggressive stimulus measures is fading away. It looks like investors began to realize that today's fall in deposit interest rates of ECB to -0.4% is a "double-edged sword," especially with regard to commercial banks and their profits that form the largest part of the ongoing credit policies.

After an initial rise in the main European stock indices by between 2.5% and 3.0% at the end of trading today they wiped out a large part of their profits. Now the common European Stoxx Europe 600 index rose by a modest 0.83 percent, Germany's DAX rose 1.37%, while the French index CAC40 - by 1.49%. Passing the initial euphoria is due largely to the sharp appreciation of the euro, which is potentially negative for export-oriented companies in the eurozone.