US Dollar Index Prints a One-Month High, USD/JPY Rallies Post-BoJ Meeting – DailyFX

US Dollar Index hits highest in one month, USD/JPY falls after Bank of Japan meeting

The US Dollar Index continues its recent upward trend, supported by declines in the Euro and the Japanese Yen. The Euro fell in the wake of last weekend’s European Parliament elections and expectations of further interest rate cuts this year, while the Japanese Yen fell after the Bank of Japan announced it would scale back its bond-buying program, although details will have to wait until its meeting on July 31. The Euro (58%) and the Japanese Yen (13.6%) are the two largest components of the six-currency index.

US Dollar Index Daily Chart

The Japanese yen has further weakened against various currencies following the Bank of Japan’s policy meeting. Financial markets had expected the bank to announce more details about the tapering of its bond-buying program (monetary tightening), but the lack of an official timeline has left the yen unstable.

With its next policy meeting not until the end of July and USD/JPY at levels where official intervention has been previously seen, the Bank of Japan will have a tough few weeks to prevent the yen from falling further.

USD/JPY daily chart

According to IG Private Client Sentiment, 22.82% of traders are net long, with the ratio of short to long being 3.38 to 1. The number of traders who are net long is 6.99% lower than yesterday and 22.81% lower than last week, while the number of traders who are net short is 8.89% higher than yesterday and 5.62% higher than last week.

We typically take a contrarian view to crowd sentiment, and the fact that traders are net short suggests that the price of USD/JPY may continue to rise. Traders are net short more than they were yesterday and last week, and combining the current sentiment with the recent changes, USD/JPY strengthens bullish contrarian trading bias.

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