- Orders to buy the Greenback surged 11%, accounting for 72% of the market
- The distribution between the long and short positions in the SWFX marketplace is unchanged, remaining at 59% bulls and 41% bears.
- 21% of traders see USD/JPY above 124.5 by mid-May
- Upcoming events: US Initial and Continuing Jobless Claims, Philadelphia Fed Manufacturing Survey
The Fed sounded unexpectedly dovish, saying that interest rates will be kept unchanged at historic low levels for longer amid concerns over low inflation and fears of derailing the US economic recovery. Policy makers did not hint on a timing of first interest rate hike since the 2008 financial crisis, but highlighted that there was more risk in lifting rates earlier than expected rather than later. However, several policy makers noted that waiting too long to hike rates could lead to "undesirably high inflation." Meanwhile, US producer prices fell the most in five years in January amid plunging energy costs, suggesting the nation's inflation will remain benign in the near term. The Labor Department reported that its producer price index for final demand dropped 0.8%, the biggest decline since November 2009, after falling 0.2% in December. It was the third consecutive month of decline in PPI. The decrease was triggered by a 10.3% plunge in energy that was also the biggest since the records began.
Other reports pointed to a moderate growth of the world's number one economy early in the first quarter. Housing starts dropped 2% to 1.07 million annual rate, as ground breaking for single-family projects fell from a 6-year peak. The number of building permits also fell unexpectedly in January. According to the Commerce Department, the number of building permits granted last month dropped by 0.7% to a seasonally adjusted 1.053 million units, down from 1.060 million in December
Yasunari Ueno, Chief Market Economist at Mizuho Securities, said that "the preliminary gross domestic product release for the fourth quarter confirms the economy is past the worst, but it's not easy to be optimistic about the path of growth from here".US data to improve
According to the consensus in the market, today's figures are likely to show further improvement in the US economy. Initial Jobless claims are estimated to retreat from 304 to 293K, while Philadelphia Fed Manufacturing Index should strengthen from 6.3 to 9.3.
USD/JPY: Mixed Signals
Glenn Levine, Senior Economist at Moody's Analytic, said that Japan's corporate sector is enjoying record profit levels and sits atop a mountain of cash, with export-facing firms, in particular, benefiting from better export sales linked to the cheaper Yen, yet, so far firms have been reluctant to deploy any of this cash and invest in additional capacity.
The USD/JPY pair met resistance yesterday just above the weekly PP level of 119.18, which caused the cross to decline. The Greenback slumped by half of yesterday's gain amount, reaching a nine-week high. The 55-day SMA supports Dollar's movement and is slightly moving downward, suggesting that the pair is likely to extend losses further today.
Daily chart
Looking at the hourly chart, the pair is actually seen fluctuating today, after Wednesday's sharp decline. Since midnight USD/JPY has rebounded, and the pair keeps growing steadily. Moreover, technical indicators in the daily time frame are showing bullish signs, meaning that the Greenback is likely to extend gains during the day, despite the bearish signs in shorter periods.
Hourly chart
Sentiment maintains bullish momentum
The distribution between the long and short positions in the SWFX marketplace is unchanged, remaining at 59% bulls and 41% bears. At the same time, the number of orders to buy the Greenback surged 11%, accounting for 72% of the market.
OANDA traders are also optimistic with respect to the Buck, since 61% of open positions are long, unchanged since yesterday. Meanwhile, the attitude of the SAXO Bank traders also remains at Wednesday's figures, with 53% of open positions being short and the remaining 47% being long.
Spreads (avg, pip) / Trading volume / Volatility
21% of traders see USD/JPY above 124.5 by mid-May
Compared to the previous week the bullish sentiment gained some more ground, as 70% of all FX Community votes are now bullish. As US has had strong data releases, its economy has been growing; this pattern is likely to continue.
aslamhammad is waiting for an upward correction, noting that if the pair manages to stay above the 118.29 monthly PP, then price can still go higher. Whereas, rokasltu thinks the Buck is likely to fall, as the pair retreated from above 120 levels last week.