- The share of purchase orders inched down from 62 to 55%
- 72% of all open positions are now long
- The Bollinger band at 101.74 represents immediate resistance
- Support is around 101.00
- 53% of the survey participants expect the US Dollar to cost more than 109.50 yen in three months
- Upcoming events: US Goods Trade Balance, US Markit Services PMI, US Final GDP, US CB Consumer Confidence, Japanese Retail Sales
On Friday the US Durable and Core Durable Goods Orders were released, both failing to meet expectations. The Durable Goods Orders dropped 2.2% in May, while the forecast stood at a 0.5% decline. At the same time, the April's reading was revised down from 3.4% to 3.3%, contributing to the negative effect the actual weak reading had. Furthermore, the Core data, which excludes the transportation sector, also disappointed, having edged lower fro, 0.5% to –0.3%, compared to the 0.1% forecast. Nevertheless, the main reason of the depressing results was exactly the transportation sector, as it plummeted 5.6% during the previous month. As a result, weakness in these factory orders justify Janet Yellen's concerns of possible economic threats the US might be facing. She stated on her testimony earlier that week that not only falling oil prices, but also weak business investments are an issue for the US economy.
Moreover, due to the relatively poor reading of the US Manufacturing PMI last Thursday, which showed that demand for manufacturing and drilling equipment was lower, the factory orders are unlikely to post significantly better numbers in the next few months. On top of that oil prices plunged even further, amid UK leaving the European Union, creating only more problems not only for the US, but for the global economy overall.
Vatsal Srivastava, director at the Blackwater Consulting, explained why the US Dollar advanced against the Yen last week. He said there was nothing fundamentally driving USD/JPY on Monday, but one of the key drivers was the falling oil prices, which was actually boosting the Yen; in analyst's opinion, as there was an addition cause for more QQE. Vatsal Srivastava also mentioned 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 summed up.
US Services PMI is the only relevant event
There are no substantial events due on Monday, that could influence the USD/JPY pair. This only event is the US Services PMI. The Services PMI, which captures business conditions in the services sector. As the services sector dominates a large part of total GDP, the services PMI is an important indicator of the overall economic condition in the US.USD/JPY attempts to begin recovery
Brexit also caused the US Dollar to weaken against most major peers, triggering the USD/JPY sell-off down to the 99.00 mark. Nevertheless, the pair managed to close trade just on top of the broadening falling wedge's support line, thus, we should now see the exchange rate rebound. However, risks of downside development persist, as technical indicators are giving bearish signals in all timeframes, while the pair opened with a small bearish gap today. In case bulls prevail the weekly PP is to limit the gains at 102.69, whereas the closest support is represented by the monthly S3 and the 50.0% Fibo circa 100.90.Daily chart
Although the down-trend was breached last Thursday, the decline on Friday caused the exchange rate to return below that resistance line. With the 50.0% Fibo providing support, the pair is likely to trade between 101.00 and 103.00 yen.
Hourly chart
Bulls remain strong, as 72% of all open positions are now long (previously 71%). At the same time, the share of purchase orders inched down from 62 to 55%.
There is a small but nevertheless bullish bias among OANDA and Saxo Bank traders as well. In case of OANDA, 70% of positions opened by its clients are long. Similarly, 58% of positions opened by Saxo Bank traders are long as well, compared to 55% last Friday.
Spreads (avg, pip) / Trading volume / Volatility
Slightly more than a half expect the exchange rate to rise above 109.50 yen
Slightly more than half of the surveyed (53%) now assume that the US Dollar is to cost more than 109.50 yen after three month time. The most popular choice, however, implies that the Greenback is to cost between 111.00 and 112.50 yen in three months, selected by 19% of the voters. According to the votes collected between May 27 and June 27, the mean forecast for Sep 27 is 108.99. At the same time, 14% of the surveyed believe the Greenback could cost either between 106.50 and 108.00 yen even more than 114.00 yen in three months.