- The number of orders to buy the US Dollar declined from 70 to 45%
- Bullish traders' sentiment returned to its Tuesday's level of 70%
- The 20-day SMA, the monthly S1 and the weekly R2 around 110.50 represent immediate resistance
- Support is at 109.76
- 58% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: US Philadelphia Fed Manufacturing Index, US Jobless Claims, US HPI, US CB Leading Index, US Natural Gas Storage, Japanese Flash Manufacturing PMI
The rebound of oil prices somewhat strengthened the US Dollar on Wednesday, causing it to outperform most major currencies. The largest gains of 1.07% and 0.97% were registered against the Swiss Franc and the New Zealand Dollar, followed by the 0.58% rally versus the Yen, 0.55% against the Euro and 0.48% against the Sterling. At the same time, the Buck had troubles outperforming the remaining commodity currencies, as an only 0.24% rally was detected against the Aussie, while the USD/CAD dropped 0.13% lower.
Sales of previously-owned homes recovered more than expected in March after plunging in February, indicating the housing market recovery remained intact despite signs of economic slowdown in the first quarter. According to the National Association of Realtors, existing home sales soared 5.1% to an annual rate of 5.33 million units last month. Economists had expected sales increasing 3.5% to a 5.30 million-unit pace in March. February's sales pace was revised slightly down to 5.07 million units from the previously reported 5.08 million units. March sales were up 1.5% from a year ago.
The housing sales numbers have been quite volatile in the first quarter of 2016. March's rebound comes after a sturdy start to the year in January, when sales reached their fastest pace in six months, followed by a decline in February. The US housing is being supported by a buoyant labour market, which has led to an acceleration in household formation. Nevertheless, sales remain constrained by a dearth of homes available for sale, which is limiting choices for buyers. At March's sales pace, it would take 4.5 months to clear the stock of houses on the market, up from 4.4 months in February. A six-month supply is considered as a healthy balance between supply and demand. The median house price increased 5.7% from a year ago to $222,700 last month.
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.
Philadelphia Fed Manufacturing Index and the US Jobless Claims
Among fundamental data releases the most important ones to influence the USD/JPY currency pair today are the Philadelphia Fed Manufacturing Index and the US Jobless Claims. The Philly Fed Manufacturing Index is a spread index of manufacturing conditions within the Federal Reserve Bank of Philadelphia. This survey, served as an indicator of manufacturing sector trends, is interrelated with the ISM manufacturing index and the index of industrial production. It is also used as a forecast of the ISM Index. Finally, the US Jobless Claims, which are released by the US Department of Labor, and are a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labour market. A larger than expected number indicates weakness in this market, which influences the strength and direction of the US economy. Earlier tomorrow the Japanese Flash Manufacturing PMI is to be release, along with the Tertiary Industry Activity. These events are likely to set the mood for the Asian session on FridayUSD/JPY poised to continue rebounding
Fears of the BoJ intervention keep driving the Japanese currency lower this week, with another USD/JPY rally taking place on Wednesday. Even though the immediate resistance area was pierced yesterday, the 110.00 major level remains intact. The closest resistance area is now located around 110.50, namely the 20-day SMA, the monthly S1 and the weekly R2, also being the final cluster before the exchange rate reaches the 112.00 mark, where the 11-week down-trend is to be retested. However, according to technical studies the Greenback could slump back under 109.00 today, amid weak fundamental data results.Daily chart
Although the USD/JPY pair keeps somewhat consolidating, but each time reaching a higher high. By the looks of the hourly chart the US Dollar risks falling today if the resistance line holds, with losses to be limited by the 200-hour SMA near the 109.00 major level.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 63% of open positions are long, compared to 60% on Wednesday. The sentiment as reported by SAXO Bank remains bullish - 58% of currently open positions are long, compared to 59% on Wednesday.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to rise above 114 yen
More than half of the surveyed (58%) now assumes that the US Dollar is to cost more than 114.00 yen after three month time. The most popular choice implies that the Greenback is to cost somewhere between 114.00 and 115.50 yen in three months, selected by more than a quarter (30%) of the voters. According to the votes collected between March 21 and April 21, the mean forecast for July 21 is 113.12. At the same time, 11% of the surveyed believe the Greenback could cost between 115.50 and 117.00 yen in three months.
Meanwhile, 63% of Dukascopy Community members still think that pair will continue its bearish development. Slightly more than 26% of traders expect the pair to close above the 108.5 level at the end of the present working week, while the average expectation stays just below this level, which is supported both by weekly pivot point and daily S1 support line.
According to megajorko, the USD/JPY is likely to appreciate by the end of the week, as he still expects the pair to reach a round number. "There are no news which could strengthen the yen. However, I think that trend is bearish in a long term", he commented.
At the same time, another trader with the Dukascopy Community under the nickname Pisaklanos believes that the USD/JPY pair might remain relatively unchanged. "It seems the BOJ resigned to the idea of a stronger yen, even besides the "adding stimulus" narrative. No action observed during the week to fend off the appreciation of the yen. My outlook is rather neutral than bearish or bullish", he backed his view.