- Share of sell orders is at 59%
- Bulls hold 58% of the market
- The currency pair has a good chance of testing the 50% retracement of the 2012-2015 up-move at 100.70
- Resistance is July 29 low at 102 yen
- 52% of the survey participants expect the US Dollar to cost less than 108.00 yen in three months
- Upcoming events: US Core PCE Price Index, US Personal Spending
US manufacturing activity contracted in July after Britain's decision to leave the European Union, official data from the Institute for Supply Management (ISM) revealed on Monday. The ISM announced that its Purchasing Managers' Index (PMI) came in at 52.6 points in the seventh month of the year, compared to last month's 53.2, its highest one-year result, whereas market analysts anticipated a slight decrease to 53.1 in the reported month. Nevertheless, the Index remained above the 50 level, which indicates expansion in manufacturing. The Index is based on data collected from about 400 manufacturing firms across the United States.
Other data released on Monday showed the US manufacturing sector remained in the expansionary region, as the seasonally adjusted Markit final Manufacturing PMI for the United States equals 52.9 points in the same month, following last month's 51.3 mark and hitting its highest level since October 2015, when it climbed to 54.1 points. The July flash PMI posted 52.9, while economic desks expected the preliminary reading to come in at 51.5 points.
US data to deteriorate
If we are to believe market consensus, both the the measure of inflation excluding food and energy and the gauge of change in consumer expenses are to show weaker numbers. The figures are to decline from 0.2 and 0.4% to 0.1 and 0.3% respectively, which could accelerate recent Dollar's depreciation.USD/JPY heads towards 100 at full speed
USD/JPY is currently in the process of forming a new bearish wave. The pair is presently trading right in the middle of the descending channel that was initiated at the turn of 2015 and 2016. The pattern implies an extension of the current sell-off towards 98-97 yen. However, there is a massive demand area circa the round level of 100 yen that is unlikely to give in easily despite the bearish indicators. Apart from being a psychological level, this is the 50% Fibonacci retracement of the four-year rally that began in 2012 and the 2014 low. If this support is breached, our longer-term outlook will be changed to bearish.Daily chart
In a lower time frame, USD/JPY has just exited the horizontal channel created by the July 29 low and the 23.6% retracement of the Friday's decline to the downside. Thus during the next few days the currency pair has a good chance of testing the 50% retracement of the 2012-2015 up-move at 100.70, although we expect more demand closer to 100 yen.
Hourly chart
Bulls continue to hold the majority, namely 58% of the market, despite a strong bearish rejection from 107. This makes USD/JPY vulnerable to an even deeper decline.
Exactly the same distribution between the bulls and bears is observed at Saxo Bank. However, OANDA traders are even more optimistic with respect to the US Dollar - about three thirds of all open positions are long, down from 69% recorded yesterday.
Spreads (avg, pip) / Trading volume / Volatility
Slightly more than a half expect the exchange rate to fall below 108.00 yen
Slightly more than half of the surveyed (52%) now assume that the US Dollar is to cost less than 108.00 yen after a three month time. The most popular choice, however, implies that the Greenback is to cost between 108.00 and 109.50 yen in three months, selected by 19% of the voters. According to the votes collected between July 01 and August 01, the mean forecast for November 01 is 106.46. At the same time, 18% of the surveyed believe the Greenback could cost more than 112.50 yen in three months.