Over the past few days the Dollar – Yen pair (USDJPY)
has taken a trip below its 200 Day Simple Moving Average, which is always
something to take notice of. It even looked for a while there that it was entering
what could have been a new downtrend.
However, the move below the 200 DMA always lacked
conviction. We can see the pinbars indicating that this move down was rejected
by the market on no less than three occasions on a daily basis (small blue
arrows). There is another pin bar in evidence, pointing in the downward
direction, but this is a special case as it was formed on the day of the Non-farm
Payrolls report for April, which was on May 2nd. There is very often
total indecision and high volatility on NFP day.
Yesterday, the first trading day of the month, was a good one for this pair. It now remains to be seen if this increase in the
value of the Dollar – Yen will be sustained. Will it break out of the
narrow range it has been in for an extended period?
Aussie short
covering on interest rate decision
The Reserve Bank of Australia (RBA) announced its
interest rate decision early this morning (GMT). As was widely expected, there
was no change in the rate.
The accompanying statement basically reiterated what
was the status quo since the last meeting: The Central Bank’s stance remains accommodative;
a period of stability is now their main aim; the currency is higher in value
than they would have expected or liked, particularly given the fall in commodity
prices; recent apparent increases in private capital expenditure seem tentative;
housing expansion is strong; jobs and wages could be better, and inflation is
within target.
They also gave it as their opinion that the markets
were attaching a low probability to any rise in global interest rates over the
period ahead.
The Aussie dollar rose after the RBA
announcement. This appears to be as a result of short covering, where market
participants reverse sell orders they had put in place in anticipation of a
fall in the value of the currency, which failed to come about. This has the
same effect as if a number of new buyers entered the market, and drives up
prices.
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