- 56% of pending orders are to sell the US Dollar
- 70% of all open positions are short
- The nearest significant resistance is around 113.10
- Downside potential down to 112.00
- Bank Holiday in Japan
Consumer prices in the United States were flat, while retail sales dropped for the second consecutive month in June. The Labour Department reported on Friday that its CPI registered an unchanged reading in the observed month, missing market expectations for a 0.1% rise, as the cost of mobile services and gasoline declining. On a yearly basis, the index surged 1.6% in June, continuing to ease from February's 2.7%, when it showed the strongest gain in five years. Furthermore, the so-called core inflation rose by the same margin of 0.1% for the third straight month.
Meanwhile, the country's retail sales registered a 0.2% drop in the reported month, affected by declines in receipts at supermarkets, clothing stores and service stations. Data showed the largest monthly fall of 1.3% in gas station sales. Overall, economists suggested that the weaker-than-expected reports are set to diminish expectations for the Fed to raise interest rates for the third time this year, with inflation being the main uncertainty factor to define the course of further monetary policy changes.
Economic calendar clear today
This trading session is considered to be calm due to lack of fundamental events that may shake tremendously the USD/JPY currency pair. Japanese banks will be closed due to Marine Day, while the only set of data from the US is the US Empire State Manufacturing Index at 1230GMT. The given measure is comprised of a survey of around 200 manufacturers in the state of New York who assess the relative level of business conditions.
USD/JPY recovers losses
The Friday's trading session for the USD/JPY currency pair started rather calmly, as it remained in the 113.50/20 range. However, bears started to pressure the pair even before US CPI and Retail Sales at 1230GMT in anticipation of weak data. These disappointing expectations realised, setting the US Dollar for a 55-pip fall in one minute. The American currency did manage to recover some losses; however, failed to overcome the 112.70 mark. It is expected that bulls may succeed at pushing the rate slightly higher in this session. Taking into account that it has formed a channel down, gains may be capped near the 112.70/80 mark or, if this level is surpassed, then at the 55-hour SMA circa 113.10. In general, the market is likely to be rather calm today, thus resulting in a lack of volatility for the pair.Hourly chart
Following the massive plunge on Friday that was caused primarily by weak US data, the US Dollar has changed its direction to the upside. However, gains have been limited, as the pair has stopped at the 20-hour SMA. Another resistance is formed by the weekly PP at 113.10, while important support rests circa 111.90.
Daily chart
The bearish market sentiment prevails in this session, as 70% of all open positions are short, compared to 66% on Friday. In addition, 56% of pending orders are to sell the US Dollar.
OANDA clients have turned bearish on the US Dollar, with 54% of traders holding short positions. In additon, Saxo Bank clients are likewise bearish, as the number of short positions in this session is 52%.
Spreads (avg, pip) / Trading volume / Volatility
Traders bullish on US Dollar
Traders expect the Greenback to depreciate down to the 111.52 mark against the Japanese Yen in three months' time (113.78 on Friday), thus demonstrating that bears have taken the upper hand. Currently, 54% of all forecasts are bearish, being located below the current spot price. Meanwhile, 23% of voters expect the US Dollar to cost somewhere between 114.00/115.50 or <106.50 yen mid-October, with 23% of survey participants choosing these trading ranges.