- The number of sell orders increased from 62 to 63%
- 70% of all open positions are long
- The 20-day SMA, the weekly and the monthly PPs around 112.50 represent immediate resistance
- Support is around 110.75
- 54% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events: US Trade Balance, US Final Services PMI, US ISM Non-Manufacturing PMI, US JOLTS Job Openings
The US Dollar advanced against most major peers, with the largest gains registered against the commodity currencies. The Greenback added 1.05% against the Kiwi, 1.00% versus the Aussie and 0.59% against the Canadian Dollar. At the same time, the Buck remained relatively unchanged against the Swiss Franc and the Euro, gaining 0.09% and 0.01%, respectively. However, losses were also registered against two major currencies, namely 0.26% versus the Sterling and 0.31% versus the Japanese Yen.
After a small rebound in January, new orders for US factory goods declined in February and business spending on capital goods was much weaker than initially estimated, the latest sign that economic growth remained weak in the first quarter. According to the Commerce Department, new orders for manufactured goods fell 1.7% as demand decreased broadly, reversing January's downwardly revised 1.2% gain. There was weakness in a number of categories, led by a sharp drop in the volatile category of commercial aircraft. Demand for durable goods, everything from airplanes to computers and household appliances, dropped 3% in February, slightly worse than the 2.8% estimate. Orders in a category that serves as a proxy for business investment were down 2.5% following a 3.3% increase in January.
The report underscores how US manufacturers are struggling with moribund global demand and a strong US Dollar, which makes American goods less competitive on overseas markets. On top of that, the sharp plunge in oil prices has resulted in dramatic cutbacks in investment spending in the energy industry. The Institute for Supply Management reported last week that its closely watched manufacturing index climbed to 51.8 in March, up from 49.5 in February.
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.
US Trade Balance and US Services PMI
Tuesday brings some US fundamental data, that could influence the USD pairs. First of all, the Trade Balance figures are expected to be released later today. The Trade Balance, released by the Bureau of Economic Analysis and the U.S. Census Bureau, is a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the USD. And finally, the US Services PMI, released by both Markit Economics and Institute of Supply and Management. It 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 US.USD/JPY to remain under 111.00
A poor reading of the US Factory Orders caused the USD to weaken against the Yen on Monday, with the Bollinger band limiting the losses. Earlier today BoJ Kuroda's statement sparked risk aversion to appear in the markets, with the USD/JPY falling lower. No impetus today is expected to turn the tables around and help the pair recover. Furthermore, technical indicators are bolstering the possibility of the negative outcome. The Buck faces a tough support cluster around 110.75, represented by the Bollinger band, the weekly and the monthly S1s, which is to prevent the pair from edging lower. In case this area gives in, the channel's support line at 110.39 will be the next target.Daily chart
The USD/JPY keeps sliding down, on the edge of remaining below the March low of 110.66. The will then be facing the 110.00 major level, a breach of which might trigger a sharper sell-off and lead the exchange rate towards the 2014 low of 100.75.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 67% of open positions are long, compared to 65% on Monday. The sentiment as reported by SAXO Bank remains bullish - 62% of currently open positions are long, up from 61% on Monday.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 114 yen
The majority (54%) now assumes that the US Dollar is to cost less than 114.00 yen after three month time. The most popular choice implies that the Greenback is to cost somewhere between 106.50 and 108.00 yen in three months, selected by 23% of the voters. According to the votes collected between March 05 and April 05, the mean forecast for July 05 is 112.95. At the same time, 14% of the surveyed believe the Greenback could cost between 117.00 and 118.50 yen in three months.