- SWFX market sentiment is 63.67% bearish
- 55.13% of pending orders in 100-pip range are set to buy
- Pair opened Wednesday's session at 111.99
- The nearest resistance is located near 112.30
- Upcoming Events: US Building Permits and Crude Oil Inventories
Consumer prices in the United States were flat, while retail sales dropped for the second consecutive month in June. The Labour Department reported on Friday that its CPI registered an unchanged reading in the observed month, missing market expectations for a 0.1% rise, as the cost of mobile services and gasoline declining. On a yearly basis, the index surged 1.6% in June, continuing to ease from February's 2.7%, when it showed the strongest gain in five years. Overall, economists suggested that the weaker-than-expected reports are set to diminish expectations for the Fed to raise interest rates for the third time this year, with inflation being the main uncertainty factor to define the course of further monetary policy changes.
The US Producer Price Index for final demand nudged up 0.1% in June on the back of sustained increases in services cost that managed to offset plunging energy prices, data released by the Labour Department revealed on Thursday. In 12 months through June, the PPI advanced 2.0%, down 0.4% from May's reading, as the energy-led spike was dropped out of the calculation. Meanwhile, the Core Finished Goods PPI advanced a modest 0.1% over the reported period, missing economists' expectations for a 0.2% uptick and following the 0.3% surge registered in May. Overall, economists suggested that the weaker-than-expected reports are set to diminish expectations for the Fed to raise interest rates for the third time this year, with inflation being the main uncertainty factor to define the course of further monetary policy changes.
US housing market in focus
On Wednesday, there is only one data release, which might influence the financial markets form the side of the US Dollar. The US Building Permits information will be released at 12:30 GMT. However, it should be noted that over the last four months it did not arouse high interest among market participants.
USD/JPY finds support at weekly S1
On Tuesday, the USD/JPY currency pair continued to trade lower, but lost its momentum in the evening when the pair traded in a relatively narrow range. The US Dollar is gradually approaching the upper channel boundary which is being reinforced by the 55-hour SMA circa 112.30. Thus, it is likely that the pair continues to trade sideways ahead of US fundamentals at 1230GMT. In case of solid data, the Greenback should breach the channel and surge to the upside until the 100-hour SMA, at least. Meanwhile, the nearest support levels are set by the weekly S1 and the monthly PP at 111.70/111.39, accordingly. The former worked affectively at halting the pair yesterday; thus the same scenario may repeat today once again.Hourly chart
In the early Wednesday morning the USD/JPY has bounced off from a combined support level formed by the 55-, 100- and 200-day SMAs and the weekly S1 at 111.69. This springboard should give the currency pair an impulse strong enough to let it easily jump to the weekly PP at 113.098. In case this scenario materializes, this will mean and end of the narrow one week long descending channel.
Daily chart
The bearish market sentiment still dominates in this trading session, even though the number of all short positions dropped to 63%, compared to 69% on Tuesday. Moreover, 56.90% of pending orders are to buy the US Dollar.
OANDA clients turned to be neutral on the US Dollar, as only 50.70% of all open positions are short. Similar views also hold Saxo Bank clients, whose long positions have decreased to 48.50%, compared to 51% yesterday.
Spreads (avg, pip) / Trading volume / Volatility
Traders bullish on US Dollar
Traders expect the Greenback to depreciate down to the 111.98 mark against the Japanese Yen in three months' time, thus demonstrating that bears have taken the lead. At this moment, 57% of all forecasts are bearish, being located below the current spot price amounting to 112.16. Accordingly, 43% of respondents anticipate advance of the currency exchange rate. Among them, 16% hold the view that by the end of October the price of the USD/JPY will fluctuate in a range between 112.5 and 114.0