- There is now no visible difference between the amounts of buy (49%) and sell (51%) orders
- Share of bulls declined from 74 to 72%
- 200-hour SMA at 113.40 represents immediate resistance
- Support is the rising support line at 112.90
- 50% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events: US Retail and Core Retail Sales (Feb), US PPI and Core PPI (Feb), US Empire State Manufacturing Index (Mar), Japanese Trade Balance (Feb)
Along with the Japanese Yen, the US Dollar benefited the most from the yesterday's risk-off sentiment. The currency appreciated as much as 1.05% relative to the New Zealand Dollar and 0.67% relative to the Australian Dollar.
While the US data are yet to be released today, the Bank of Japan kept monetary policy unchanged, after adopting a negative interest rate strategy in January in a bid to underpin inflation and create a virtuous spending cycle. The central bank offered a bleaker view on the world's third biggest economy and warned of waning inflation expectations, noting that global headwinds may justify introducing more stimulus ahead. In line with expectations, the BoJ kept its pledge to expand base money at an annual pace of 80 trillion yen. It also left unchanged a 0.1% negative interest rate it applies to some reserves parked by financial institutions at the central bank. The BoJ said exports and production has been weak due to the effects of the slowdown in emerging economies and said that China posed a risk to the outlook for Japan. The BoJ also revised down its estimate of inflation expectations to say they were "weakening recently," acknowledging that one of the key channels of its massive stimulus programme was not working as well as hoped for.
Meanwhile, Japan's industrial output index posted a strong result on a monthly basis at the beginning of the year, revealing a robust recovery in Japan's factories over January compared with the last month in 2015. Industrial production jumped 3.7% month-on-month in January, the Ministry of Trade, Economy and Industry reported.
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 data to worsen
Judging by the estimates, the retail sales in the United States are to contract by 0.1% in February after they grew 0.2% a month earlier. At the same time, the analysts expect producers to cut prices by 0.2%, which creates a bearish environment for the Dollar. Wednesday is going to be an even more important day for the major pairs, as after the inflation and real estate market figures the FOMC is to publish its statement and economic projections. According to the CME FedWatch tool, there is a 4% chance the rate is going to be cut back to 25 bps. Meanwhile, the probability of a rate hike in April stands at 27%.USD/JPY approaches apex of the triangle
USD/JPY keeps consolidating within the boundaries of the symmetrical triangle. Eventually, the pattern is expected to be broken to the downside, considering that the bears remain in control of the market. The negative outlook is reinforced by the technical indicators in the weekly and monthly time frames. During the next several days, the US Dollar might recover to 113.70, on the condition that it manages to confirm the trend-line at 112.90. Once the lower boundary of the pattern is broken, there is likely to be a long-term sell-off, potentially down to the 2014 low at 100.80.Daily chart
In the hourly chart, USD/JPY is well-positioned for a rebound. The pair is highly likely to find strong support at 112.90 and recover past the 200-hour SMA before once again giving in to the selling pressure and eventually exiting the triangle to the downside.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 63% of open positions are long (61% yesterday). The sentiment as reported by SAXO Bank is only marginally bullish - 56% of currently open positions are long, down from 57% recorded 24 hours ago.
Spreads (avg, pip) / Trading volume / Volatility
Exactly a half expect the exchange rate to rise above 114 yen
Expectations are equally divided between above 114.00 yen and under 114.00 yen. The most popular choice implies that the Greenback is to rise above 120.00 yen in three months, selected by 18% of the voters. According to the votes collected between Feb 14 and March 14, the mean forecast for June 11 is 114.33. At the same time, 15% of the surveyed believe the Greenback could fall in under 108.00 yen after a three month period.