- Number of buy orders surged from 63% to 71
- The SWFX market sentiment improved, as 61% of all positions are now long (59% yesterday)
- 22% of traders see USD/JPY above 124.5 by June
- The nearest resistance is represented by the weekly R1 at 120.06, while the closest support is now the weekly PP at 119.34
- Upcoming events: US ADP Non-Farm Employment Change, FOMC Member Evans Speech, US ISM Non-Manufacturing PMI, US Crude Oil Inventories, US Factory Orders
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", adding that the question "whether or not massive quantitative easing at the BoJ is actually working for the domestic economy" remains topical.Two high-impact data releases expected today
Today the US ADP Non-Farm Employment Change is expected to improve, compared to its previous value, while the ISM Non-Manufacturing PMI is likely to edge down a little, whereas both should have high impact on the USD/JPY pair's movement.
USD/JPY rally delayed
According to Andrew Wilkinson, there are signs that "the market is getting back into that mode of expecting further stimulus." As a result, it is reasonable to "expect the Yen to continue weakening into 120s."
USD/JPY pair bounced back on Tuesday after a three-day rally. The pair tested the weekly PP, which proved to be strong enough to stop the currency from declining further. Moreover, at the end of the trading day the Greenback settled between the weekly PP and R1 at 119.71, as was anticipated. The daily technical indicators are emitting neutral signals; hence, the Buck is likely to trade in the same range as yesterday (between the weekly PP and R1), unless some data release today surprises with unexpected results.
Daily chart
On the hourly chart the USD/JPY pair has been appreciating since the beginning of the day, as the 100-hour SMA provided support for a rebound. However, the 55-hour SMA keeps preventing the pair from further gains. The Greenback appears to be stuck in the range between the 20 and 55-hour SMAs, as it awaits for the Non-Farm Employment Change data to stimulate its movement.
Hourly chart
Sentiment keeps rising
The SWFX market sentiment improved, as 61% of all positions are now long (59% yesterday). The number of buy orders surged even more, from 63% to 71%.
OANDA traders are as optimistic with respect to the Greenback, since 58% of open positions are long. In the meantime, the attitude of the SAXO Bank traders turned slightly to the negative side, being that 52% of open positions are short and the remaining 48% are long.
Spreads (avg, pip) / Trading volume / Volatility
22% of traders see USD/JPY above 124.5 by mid-May
The sentiment among Dukascopy traders is rather strong for this currency pair, as the average expectation for the end of this week is located around 119.9 level, while 66% of all votes are currently bullish.
KusumFx is expecting a positive reaction on the USD/JPY pair, as he mentioned that "USD has been in a up-trend from September 2012 and is currently trading in a very narrow range." Basing his forecast on Fibonacci retracement levels, he also added that "the price will be somewhere between 120.57 and 122.00 in early March 2015." Meanwhile, Likerty supports the bearish outcome on the Buck, as he said that the Yen is going to continue its correction, which started from 120.50's.