This article is originally referred from IronFX Intraday Commentary.
• The dollar traded lower or unchanged against its G10 counterparts during the European morning Thursday, ranging from -1.4% against the JPY to -0.13% against the NZD. The greenback was virtually unchanged against EUR, SEK, NOK, CAD and GBP.
• The Japanese yen surged against all of its major peers after BoJ Governor Haruhiko Kuroda said that there was no need and no possibility for the Bank to stimulate the economy with “helicopter money”. Markets had been betting on an aggressive stimulus package at the next week’s Bank meeting, but this comment, diminished any hopes for such a radical policy experiment. Governor Kuroda also said that there was no significant limitations on Japan’s ability to ease policy further if necessary, and added that at this moment the Bank can expand its current policies, including a further deepen of interest rates into the negative territory. In the lead-up to the rate decision, we would prefer to take a cautious stance against JPY and let the dust of further easing to settle and show the currency’s near-term bias. In the past, Governor Kuroda had similarly ruled out the possibility of negative interest rates, up until the January meeting when the Board decided to push the rates below zero.
• GBP/JPY tumbled during the European morning Thursday following the comments by BoJ Governor Kuroda. The pair plummeted after it hit resistance near the 142.50 (R2) zone to trade back below 141.00 (R1). The rate now looks to be headed towards the 138.10 (S1) support territory. Although the rate is trading below the upside support line taken from the low of the 11th of July, I maintain my flat stance for now with regards to the short-term outlook. I would like to see a decisive break below 136.40 (S2) before I get confident that the recent recovery is over and that the short-term outlook is back to the downside. Such a move is possible to open the way for our next support territory of 133.25 (S3). Our short-term oscillators have turned down, supporting that the slide may continue for a while, at least for another test near 138.10 (S1) or close to 136.40 (S2). The RSI has turned down after it hit its downside resistance line, while the MACD, although positive, has topped and fallen below its trigger line. There is also negative divergence between both these indicators and the price action. Zooming out to the daily chart, I still see a longer-term downtrend. Therefore, I would treat the recovery started on the 11th of July, or any possible extensions of it, as a corrective phase of that longer-term down path.
• Support: 138.10 (S1), 136.40 (S2), 133.25 (S3)
• Resistance: 141.00 (R1), 142.50 (R2), 144.00 (R3)
Original Source: IronFX Intraday Commentary