- The portion of purchase orders slid from 57 to 56%
- 73% of traders are short the Greenback
- The 200-day SMA around 121.47 is the nearest resistance
- Immediate support is around 120.57, represented by the Bollinger band, the 55 and the 100-day SMAs
- 58% of the survey participants expect the US Dollar to cost less than 120.00 yen in three months
- Upcoming events today: US Core PCE Price Index, US Personal Spending and Income, US ISM Manufacturing PMI, FOMC Member Fischer Speech
The US Dollar was able to post relatively solid gains against most major peers on Friday and over the weekend, with exception versus the commodity-based currencies. The Greenback advanced the most versus the Yen, which in turn suffered from the BoJ's unexpected stimulus decision, with the USD/JPY climbing 1.95% higher. At the same time, the Buck added 1.01%, 0.92% and 0.82% against the Euro, the Swissie and the Pound, respectively. The AUD/USD remained completely unchanged, whereas the NZD/USD inched 0.05% higher. The only significant loss of 0.38% was registered against the Canadian counterpart.
The world's number one economy slowed sharply in the fourth quarter, stoking concerns about its momentum in 2016. The US gross domestic product increased at an annualized 0.7%, according to the Commerce Department, as lower oil prices continued to hurt investment by energy companies and unseasonably mild weather dent consumer spending on utilities and apparel. The US growth pace followed a 2% rate in the third quarter. Overall, the US economy grew 2.4% in 2015 after a similar growth pace in 2014. The weak growth could stoke new concerns about the nation's ability to withstand a series of major headwinds, including a slowdown in China and a stronger US Dollar that has cut profits for American manufacturers. Nevertheless, the GDP figure for the fourth quarter is only a preliminary gauge and will be a subject to revision over the next two months.
In the final three months of 2015, businesses accumulated $68.6 billion worth of inventory, down from $85.5 billion in the September quarter. The small inventory build subtracted 0.45 percentage point from the first estimate of fourth-quarter GDP growth. The US Dollar, which has appreciated 11% versus its counterparts since last January, remained a drag on exports, resulting in a trade gap that subtracted 0.47 percentage point from GDP growth in the reported period.
Vatsal Srivastava, director at the Blackwater Consulting, explains why the US Dollar is a advancing against the Yen this week. Even though he says that there was nothing fundamentally driving the USD/JPY on Monday, one of the key drivers is the falling oil prices, which is actually boosting the Yen, in his opinion, as there is an addition cause for more QQE. Vatsal Srivastava also mentions that "it is going to be a hard economic ride ahead and there seems to be no light on the horizon for Japan as of now". "Lets hope for the best," he added.
US ISM Manufacturing PMI and Core PCE Price Index
Focus shifts to US fundamentals today, with the most important event being the US ISM Manufacturing PMI. The Manufacturing Purchasing Managers Index (PMI) is released by both the Chartered Institute of Purchasing & Supply and the Markit Economics. It captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the manufacturing PMI is an important indicator of business conditions and the overall economic condition in the United States. Another event worth paying attention to is the the Core Personal Consumption Expenditure, which is released by the US Bureau of Economic Analysis and shows an average amount of money that consumers spend in a month. "Core" excludes seasonally volatile products such as food and energy in order to capture an accurate calculation of the expenditure. It is a significant indicator of inflation.USD/JPY makes a U-turn
The USD/JPY currency pair's rally, triggered by the BoJ's decision, was only prevented by the 200-day SMA circa 121.46 last Friday. The same SMA keeps providing formidable resistance today, increasing the chance of the Buck turning around and inching lower against the Yen. Meanwhile, immediate support is represented by the Bollinger band, the 55 and the 100-day SMAs around 120.57. The 55-day SMA is also on the edge of crossing the 100-day one to the downside, which is a signal to sell the US currency. Other technical studies, on the other hand, are unable to confirm the bearish scenario.Daily chart
Since the USD/JPY rebounded from the support line and broke out of the rising wedge pattern to the upside, momentum has been slowing. The pair is struggling to edge far beyond the 121.50 level, also approaching the resistance line circa 123.00. In spite of a possible slowdown today, the bullish momentum remains intact.
Hourly chart
Bears dominate the market
Other market participants, such as OANDA and SAXO Group, have a completely different sentiment, as the majority of their traders still hold long positions. Among SAXO Bank, 53% of traders remain long the US Dollar, whereas 60% of all positions at OANDA are also long.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 120 yen
The largest half of the survey participants (58%) expect the US Dollar to cost less than 120.00 yen in three months. The most popular choice is the 114.00-115.50 price interval, selected by 27% of the voters; however, according to the votes collected between Jan 01 and Feb 01, the mean forecast for May 01 is 118.56. At the same time, 15% of the surveyed believe the Greenback could fall in the 120.00-121.50 price interval after a three month period.