- 60% of all pending orders are to purchase the Buck
- 73% of traders hold short positions
- The nearest resistance is at 117.50, namely the monthly S1
- Major demand area is seen circa 115 yen
- 55% of the survey participants expect the US Dollar to cost more than 120 yen in three months
- Upcoming events: US JOLTS Job Openings, US Wholesale Inventories, Japanese PPI
The US currency experienced mixed performance on Monday, but a rather noticeable development was seen specifically in the USD/JPY pair. Risk aversion drove the USD/JY 0.87% lower yesterday, whereas the Buck also declined 0.40% against the Swissie, 0.31% versus the Euro and 0.27% against the Aussie. At the same time, the only significant gain was recorded against the Sterling, namely 0.48%; while the USD/CAD and NZD/USD both remained relatively unchanged, edging 0.07% higher and 0.02% lower, respectively.
Japan logged an 18th current account surplus in a row amid a plunge in crude oil imports and a travel surplus due to the Japanese Yen's depreciation. In the final month of 2015, Japan reported a current account surplus of 960.7 billion yen, compared with 225.9 billion yen a year earlier, according to the Finance Ministry. Trade exports increased 5.5% to 6.247 trillion yen, while imports dropped 2.2% to 6.059 trillion yen. In 2015, the nation's current account surplus surged more than six fold from the previous year to 16.64 trillion yen, with imports slumping 10.3%, while exports rose 1.5%.
Japan has been relying heavily on energy imports since the March 2011 Fukushima nuclear catastrophe, with most of the country's commercial reactors remaining shut down. Oil prices are likely to continue to be a major driver influencing Japan's trade balance, as exports are predicted to remain weak this year. The average crude oil imports plummeted 41% as average oil prices almost halved to $55 per barrel in 2015. In addition to that, a record travel surplus of 1.12 trillion lifted the current account balance, as the Yen's weakness attracted foreign visitors to Japan. The number of foreign tourists visiting Japan surged 47.1% in 2015 from a year earlier to a record 19.74 million. The Japanese Yen lost 14.5% versus the US Dollar from the previous year to trade at 121.09.
Vatsal Srivastava, director at the Blackwater Consulting, explains why the US Dollar is a advancing against the Yen this week. Even though he says that there was nothing fundamentally driving USD/JPY on Monday, one of the key drivers is the falling oil prices, which is actually boosting the Yen, in his opinion, as there is an addition cause for more QQE. Vatsal Srivastava also mentions that "it is going to be a hard economic ride ahead and there seems to be no light on the horizon for Japan as of now". "Lets hope for the best," he added.
Relatively quiet Monday
The only relevant upcoming economic data release today US JOLTS Job Openings. The US JOLTS Job Openings are the number of job openings during the reported month, with exception of the farming industry. According to the forecasts, improvements are expected in both economic data releases, thus the impact on the Cable could be rather muted. However, with risk aversion being dominant on the market for the second day in a row, fundamental data might have close to no impact on the prices.USD/JPY slides deeper down on risk aversion
With demand for safe-haven assets higher on Monday, the USD/JPY currency pair fell to a one-year low, while volatility stretched out even further. The risk-off sentiment also dominates today, therefore, the Greenback is likely to end the day in the red zone again versus the Yen, despite daily technical studies suggesting otherwise. The nearest support is represented by the Bollinger band and the weekly S1 at 119.93, but a drop towards the second target, namely the monthly S2 at 113.88, is not out of the question.Daily chart
The USD/JPY has been declining for slightly more than a week now, forming a relatively unstable descending channel on the hourly chart. According to this patter, we might see the exchange rate rise above the 2015 low today, but a breakout is unlikely and the overall trend remains bearish.
Hourly chart
SWFX sentiment stays bearish; elsewhere sentiment is bullish
Traders at OANDA and Saxo Bank have a diametrically opposite view of the pair's future. Clients of both brokers are mostly bullish. Canadian-based foreign exchange company reports that 66% of open positions are long (yesterday 74%), and the Danish bank reports that 59% of its clients' positions are long, compared to 67% previously.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to rise above 120 yen
The largest half of the survey participants (55%) expect the US Dollar to cost more than 120.00 yen in three months. The most popular choice is the 120.00-121.50 price interval, selected by 18% of the voters; however, according to the votes collected between Jan 09 and Feb 09, the mean forecast for May 09 is 119.52. At the same time, 12% of the surveyed believe the Greenback could fall either in the 114.00-115.50 or the 121.50-123.00 price interval after a three month period.