- 55% of all pending orders are to sell the Buck
- 58% of traders are long the US Dollar
- Immediate resistance lies at 113.75
- The closest support rests around 113.12
- Upcoming events: US Building Permits, US Philadelphia Fed Manufacturing Index, US Initial Jobless Claims, US Housing Starts, US JOLTS Job Openings
As analysts expected, the US Federal Reserve raised interest rates at its March monetary policy meeting on Wednesday amid rising inflation, solid economic growth and the strong labour market. The Central bank lifted its overnight interest rate by 25 basis points to a range of 0.75% to 1.00%. This was the necessary step to get the Bank's monetary policy back to a normal footing. The Fed Chair Janet Yellen said in a statement that the economy performed strong over the last couple of months, in line with policymakers' forecasts. The Fed also confirmed its intention to raise rates at least two more times this year, if the economy remains on the track. Fed officials noted that inflation was close to the Bank's target of 2% and corporate investment rebounded after a few months of weakness. Analysts suggest that interest rates are unlikely to return to a neutral level until the end of 2019.
Moreover, some analysts see a faster pace of increases in 2017. Earlier on the day, the Bureau of Labour Statistics reported consumer prices rose 0.1% last month, following January's gains of 0.6% and surpassing analysts' expectations for a 0.0% reading. Meanwhile, core inflation advanced 0.2%, slightly down from a 0.3% climb seen in January but in line with forecasts. Other data released showed retail sales and core retail sales rose 0.1% and 0.2%, respectively.
Focus turns to US fundamentals
From the US side a number of fundamental data is due. First of all, the Building Permits; they show the number of permits for new construction projects. It implies the movement of corporate investments and tends to cause some volatility to the USD. As every Thursday, the Initial Jobless Claims are to be released today. They 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. Finally, the Philadelphia Fed Manufacturing Survey. It 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 IndexUSD/JPY swims in proximity to 113.00 again
Even though the Fed raised rates on Wednesday, both inflation and labour market showed improvements, the US Dollar still plummeted on a cautious Fed stance. Against the Yen a nearly 140-pip loss was registered, but from the technical perspective this was anticipated. The decline only confirmed the ascending channel pattern's resistance line, allowing the pair to cover most of the distance towards retesting the lower boundary. The monthly PP and the 100-day SMA is now the only obstacle on the Buck's path, which is expected to be crossed today. However, a drop under 113.00 is doubtful just yet, but is required for the up-trend to be reconfirmed this week.Daily chart
The 200-hour SMA failed to provide the required support, which caused the US Dollar to plummet against the Yen yesterday. The pair found support only around 113.30, where it appears to have begun consolidating. More bearish momentum is expected, as no other significant levels are to help the Buck recover at the moment.
Hourly chart
Now 58% of traders are long the US Dollar (previously 53%), but 55% of all pending orders are to sell it, compared to 48% on Wednesday.
Right now 55% of OANDA clients are bulls, compared to 54% on Wednesday. In the meantime, Saxo Bank clients retain a positive outlook towards the US Dollar, being that 57% of their open positions are now long and the remaining 43% are short.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish on the Dollar
According to the poll that gathered forecasts between February 16 and March 16, traders expect the US Dollar to appreciate to 115.01 yen in three months' time, while the forecast for March 31 was 117.66 yen. It is also worth noticing that 68% of all forecasts fall above 114 yen, which is above the current spot price. The majority of people voted expect the US Dollar to cost somewhere between 118.50 and 120.00 yen in three months, with 20% of the survey participants choosing this trading range. At the same time, the second most popular interval was the 114.00-115.50 one, with 16% of survey participants choosing it.