The dominant themes since the Federal Reserve's surprise announcement to implement quantitative easing on Wednesday have been U.S. dollar weakness and commodity strength, but on Friday those positions are being scaled back.
In just two days following the announcement, the dollar had fallen 5 percent versus the euro, 3 percent against the pound and 4 percent versus the yen. Oil prices, meanwhile, soared 7 percent above $51 a barrel to the highest level this year.
The dollar was able to recover lost ground on Friday; but the rebound was more a relief rally - with shorts squaring positions - than a genuine recovery in sentiment. A look to the Dollar Index reveals the true state of the world’s most actively traded currency. Friday’s positive close was the first in nine sessions – marking an unconvincing end to the dollar’s worst trend since February of 2008.
USDJPY technically has now reached its measured move objective off of the head and shoulder top by 99.67, and after slightly exceeding the previous 2009 high/major double bottom neckline by 94.62 to 93.55, should finally find some support. There is a confluence of support by Thursday’s low in the form of the previous double bottom neckline, the 50% fib retrace off of the 87.15-99.70 move and the 50 day ema.
On Friday, USDJPY managed to close above 38.2% retracement with COG and BB at oversold position, but the blue lag still has space to move downward that might pull prices down or consolidating.
If prices fall below 50% retracement, the next support will be 61.8% at 92.00/91.90. If price do go to this level, the red lag will have a possibility of going under 85 level which caused a bearish tone. Falling below 92.00 level also breached the 23.8% retarecement of swing high at August 2008 to the swing low of the double bottom .
On the other hand, USD/JPY would rise further in April with the 100 level could be seen in the mid term.
