- The number of buy orders slid from 65 to 52%
- Today 72% of all open positions are now long
- The nearest support is around 112.00, namely weekly S1
- Major supply area is seen at 113.00 yen
- 64% of the survey participants expect the US Dollar to cost less than 120 yen in three months
- Upcoming events: US ISM Manufacturing PMI, US Markit Manufacturing PMI, US Construction Spending, US ISM Manufacturing Prices
The US currency experienced mixed performance over the day, as US Chicago PMI and the US Pending Homes Sales figures disappointed yesterday. The Greenback gained the most versus the Kiwi and the Euro, adding 0.58% and 0.54%, respectively. Smaller gains of were seen versus the Loonie (0.20%) and the Swiss Franc (0.16%), while the Buck lost 1.15% versus the Japanese currency, which in turn soared on the return of risk-off sentiment. Other losses were seen versus the Sterling, namely 0.32%, and the Aussie, 0.17%.
Japan retail sales unexpectedly dropped for the third month in a row in January, indicating continuing softness in consumer sentiment and suggesting consumer demand is unlikely to spur a recovery in growth this quarter. Sales slid 0.1% year-on-year in January, compared with economists' forecast for a 0.2% increase. Measured on a monthly basis, retail sales dropped 1.1% in January, the Ministry of Economy, Trade, and Industry reported. Weak consumer spending has been a drag on overall growth of the world's third biggest economy in recent quarters. Gross domestic product contracted 1.4% in the fourth quarter amid bigger-than expected decline in household spending. Private consumption decreased 0.8% over the fourth quarter, subtracting 0.5 percentage points from GDP growth. Meanwhile, a separate report showed Japan's industrial output increased 3.7% in January, up for the first time in three months. Manufacturers predict output to decline 5.2% in February and increase 3.1% in March.
Prime Minister Shinzo Abe's three-arrowed based economic strategy, which includes monetary expansion, fiscal stimulus and structural reforms, has seen the economic performance of the world's third biggest economy patchy at best so far.
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 Manufacturing PMI
From the US side only two significant economic data releases are scheduled for today, namely the Manufacturing Purchasing Managers Indexes (PMI), one released by the Markit Economics, while the other by the Institute for Supply Management. The PMI captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the manufacturing PMI is an important indicator of business conditions and the overall economic condition in the United States. From Japan there are no significant data releases scheduled for today or tomorrow.USD/JPY attempts to regain the bullish momentum
As was anticipated, the USD/JPY currency pair weakened on Monday and pierced the immediate support area; however, the second target at 112.00 was not reached. Even though demand for the safe haven Yen remained strong earlier today and pushed the pair closer to the now immediate resistance—the weekly S1 at 112.01. Investors appear to have regained some confidence in the Buck, helping the pair recover from intraday losses on the moment of writing, but the resistance at 113.00, namely the weekly PP, if not to contain the volatility, then could keep the Greenback from appreciating. In case of a breach, the pair could potentially even reach the second resistance around 114.00.Daily chart
The 200-hour SMA failed to keep the pair from falling yesterday, but the bullish momentum appears to have been regained earlier today. The nearest resistance proved to be unreliable, therefore, we might now see the USD/JPY rise up to 114.88, namely the two-week high.
Hourly chart
SWFX sentiment stays bullish
Traders at OANDA and Saxo Bank have a diametrically opposite view of the pair's future. Clients of both brokers are mostly bullish. Canadian-based foreign exchange company reports that 65% of open positions are long (previously 63%), and the Danish bank reports that 58% of its clients' positions are long, compared to 57% previously.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 120 yen
The majority of the survey participants (64%) expect the US Dollar to cost less than 120.00 yen in three months. The most popular choice is the 120.00-121.50 price intervals, selected by 17% of the voters; however, according to the votes collected between Feb 01 and March 01, the mean forecast for May 31 is 116.81. At the same time, 14% of the surveyed believe the Greenback could fall either in the 111.00-112.50 price interval or in the 114.00-115.50 price interval after a three month period.