- The number of buy orders edged up by two percentage points, now accounting for 63% of the market
- Market sentiment among SWFX traders improved over the day, as 59% of all positions are now long
- 22% of traders see USD/JPY above 124.5 by mid-May
- Nearest resistance is located at 120.55, whereas the closest support is represented by the weekly R1
- Upcoming events: US Total Vehicle Sales, US IBD/TIPP Economic Optimism, Fed Chair Yellen Speech, US ADP Non-Farm Employment Change, US ISM Non-Manufacturing PMI
Fed's preferred gauge of US consumer prices dropped in January partly due to lower oil prices, undershooting the central bank's goal of 2% annual inflation for the 33rd straight month. The price index for personal consumption expenditures climbed 0.2% in January from the previous year, following the annual growth of 0.8% in December, the Commerce Department reported. It was the lowest level for headline inflation since October 2009, when prices ticked up 0.1% from a year earlier after seven months of year-on-year price drops as the 2007-2009 recession ended. Excluding volatile categories of food and energy, consumer prices climbed 1.3% in January from the previous year, unchanged from annual growth of 1.3% in December. Measured on a monthly basis, prices declined 0.5% in January from the preceding month, while core prices ticked up 0.1% from December.
Meanwhile, the Institute for Supply Management said US factories increased their activity at the slowest pace in more than a year in February, with the corresponding index dropping to 52.9, down from 53.5 in January. In contrast, Markit reported that manufacturing activity across the US posted another solid month in February. Markit's final PMI rose to 55.1 compared with 53.9 in January. The reading marked the highest level since October last year, when it reached 55.9.
Andrew Wilkinson, Chief Market Analyst at Interactive Brokers, said that "the Japanese economy probably requires further stimulus from Bank of Japan, I guess the biggest question mark hanging there is: whether or not massive quantitative easing at the BoJ is actually working for the domestic economy?"Yellen's Speech, Non-Manufacturing PMI and the Non-Farm Employment Change expected to have negative impact on the US Dollar
Today there will be no significant US data released; however, on Wednesday the Non-Manufacturing PMI and Non-Farm Employment Change are both expected to worsen. These two data releases, along with Yellen's speech, are likely to force the Greenback to decline.
USD/JPY extended gains
Andrew Wilkinson also mentioned: "We saw the Yen strengthening to around 117.5. We have seen great weakening or a resumption of that trend of weaker Yen as the weeks went on one heading towards 120 vs the dollar. Looks like if the market is getting back into that mode of expecting further stimulus, one would expect the Yen to continue weakening into 120s."
The Greenback appreciated versus the Japanese Yen yesterday, as was anticipated. USD/JPY pair surged for the third consecutive day after a number of US data releases on Monday. Moreover, the pair outperformed, as it breached the weekly R1 level and settled at 120.11. However, the rally is about to stop, being that the pair is expected to bounce back today according to the technical studies. Indicators are giving bearish signs in the shorter time frames, but remain bullish in the weekly one. Hence, the Buck is likely to end the trading day between the weekly R1 and PP levels around 119.74.
Daily chart
On the hourly chart the USD/JPY pair has been seen experiencing a sharp decline since midnight. The pair pierced through several supports, namely the weekly R1, daily PP and S1, and dropped down to 119.68. Fortunately, the 55-day SMA does not give up that easily and appears to have turned the tide for the US Dollar. According to the technical indicators, the pair is likely to reach the 120 level again and keep rising by the end of the day.
Hourly chart
Still more bullish traders
Market sentiment among SWFX traders improved over the day, as 59% of all positions are now long. Meanwhile, the number of buy orders also edged up by two percentage points, now accounting for 63% of the market.
OANDA traders' optimism remained unchanged with respect to the Buck, as still 56% of open positions are long. In the meantime, the attitude of the SAXO Bank traders is not as optimistic, being that 55% of open positions are short and the remaining 45% are long.