- The percentage of buy orders remains unchanged at 62%
- Liquidity consumers' confidence improved, as 63% of traders are now long the Dollar (previously 59%)
- 19% of traders see USD/JPY between 123-124.5 by end of June
- Nearest significant resistance is represented by the weekly PP at 120.27, while closest support is 55-day SMA and weekly S1 at 119.05
- Upcoming events: US FOMC Member Evans Speech, US Core Durable Goods Orders, US Durable Goods Orders, US Crude Oil Inventories
Despite negative expectations, consumer prices in the world's most powerful economy were published better than initially projected in February of this year. Moreover, the annual CPI exited the negative territory it fell into last month, while showing a zero growth. Moreover, inflation was at 0.2% on month-to-month basis and in line with estimates. However, the core reading of consumer prices, which does not include energy and food products, remained at a better mark of 1.7% during the previous month, up a tenth of a percentage point from January. Additionally, US manufacturing sector continued to expand strongly in March. A survey, published by Markit Economics, revealed a slight decrease in the PMI Index for the US manufacturing industry. The benchmark surged to 55.3 points this month from 55.1 points in February. A reading above 50 points is highlighting the rising activity.
Meanwhile, St. Louis Fed President James Bullard announced that the Federal Reserve should raise interest rates as soon as possible, stressing that low rates are not appropriate for growing US economy any more. Speaking at City Week conference in London, he also gave a prediction that US economy will gain more momentum in the second quarter of this year after a slow-down in January-March, helped by lower prices of oil and a subsequent increase in consumer spending.
Andrew Grantham, senior economist in CIBC World Markets, mentioned that they are expecting the Fed to rise interest rate in June. He backs up this conclusion by mentioning that "what we saw from the Fed statement – they said that they expected inflation to stay close to recent low levels." Andrew added that "as long as inflation does not decelerate," the Fed "could still be looking to hike rates as early as June."US Durable Goods Orders
There are still no data releases on the Japanese economy scheduled today. However, the Census Bureau is to release a report on the US Durable Goods Orders. Growth in the Headline Durable Goods Orders is expected to slow down severely, while growth in the Core number is anticipated to improve. Hence, the US Dollar might fall under serious pressure.
Grantham also gave his forecast on whether inflation in the US will pick up anytime soon. He said that an increase in prices is unlikely to accelerate, at least on the core level and probably even on the headline level, "given that we have seen some further decline in oil prices since the end of February." According to him, it is not likely that year-view rates of inflation are going to get any stronger in the near-term (next 2-3 months). Still, "in terms of Fed policy, as long as they [headline and core inflation] do not decelerate significantly, they could still be looking to hike in June."
USD/JPY recovered much slower than expected
On Tuesday, the US Dollar appreciated against the Japanese Yen, although not as much as anticipated. USD/JPY added only five pips and was nowhere near any resistance during the trading day. However, a decline is likely to take place today, due to an expectation of a reduction in the US Durable Goods Orders, while the technical studies retain their mixed signals. Closest support lies among a cluster of important levels around 119.00, which is highly unlikely to be breached.
Daily chart
Since the beginning of the week the Greenback was steadily slumping versus the Yen. Although the Buck attempted to regain some ground on Tuesday, these efforts are likely to have been in vain. The pair might have entered a down-trend channel, meaning that today the US Dollar may meet resistance at the upper trend-line and confirm the pattern.
Hourly chart
Bulls grow stronger among traders
Liquidity consumers' confidence improved, as 63% of traders are now long the Dollar (previously 59%). Meanwhile, the percentage of buy orders remains unchanged at 62%.
OANDA traders' sentiment slightly improved, as 62% of all positions are now long. SAXO Group's market participants also have more bulls among them, as 72% of traders are long the Greenback.
Spreads (avg, pip) / Trading volume / Volatility
19% of traders see USD/JPY in 123.0-124.5 interval by end-June
Concerning the present week, the sentiment experienced substantial changes, as a vast majority of votes now are positive, namely 57.1% of them. The average prediction for Friday of this week is located around the 119.8 major level, but more than 22% of all votes are placed in the range between the 120.3 and 121.3 levels.
One of the community members, Likerty, has a bullish outlook towards USD/JPY. He said the story is different with the Dollar/Yen, than with other majors. However, the traders does not expect the Greenback to go over the 121.40 level. Megajorko, another survey participant, retains a bearish outlook towards the currency pair. The community member mentioned that there is a high possibility that the Yen will start gaining power and that he still prefers to be short the Buck for the time being.