- There are nearly three quarters (73%) of orders to sell the US Dollar
- Today 70% of traders hold long positions
- The weekly S1 and the Bollinger band around 111.55 represent immediate support
- Resistances are the 20-day SMA and the weekly PP around 112.65
- 59% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events: US Jobless Claims, Chicago PMI, FOMC Member Dudley Speech, Japanese Tankan Manufacturing and Non-Manufacturing Indexes
The US Dollar remained weak after Yellen's dovish statement and, as a result, declined against most major peers on Wednesday. The Greenback sustained the largest losses against the New Zealand Dollar, the Loonie and the Aussie, slumping 0.98%, 0.83% and 0.56%, respectively, due to an increase in oil prices. Meanwhile, the EUR/USD pair appreciated 0.41%, while smaller declines were registered against the Yen (0.24%) and the Swiss Franc (0.19%). The Buck, however, managed to climb 0.06% higher against the British Pound.
US private companies continue to create new positions, with 200,000 jobs added this month, according to payrolls processor ADP and Moody's Analytics. Economists had expected the ADP National Employment Report to show a gain of 194,000 jobs. However, private payrolls in February were revised down to 205,000 from an initially reported 214,000 surge. The services sector was the biggest contributor to the employment gain, creating 191,000 jobs. The figure, however, represented a decline form 204,000 in February. Increasing employment levels allow US households to spend more lavishly, thereby bolstering economic activity and shielding the world's biggest economy against external headwinds. The report release comes two days prior to a more comprehensive non-farm payrolls report from the Labor Department. Economists anticipate the report to show growth of 200,000 jobs, with the unemployment rate remaining steady at 4.9%. In a speech earlier in the week, Fed Chair Janet Yellen noted that improvement in the labour market over the past two years exceeded all expectations.
Nevertheless, Yellen insisted on a slower path and more cautious approach to interest rate hikes amid global economic and financial uncertainties, which pose risks to the world's number one economy. Yet Yellen expected headwinds from slowdown abroad, low oil prices and uncertainty over China to wane and allow the US economy to continue recovering and justify gradual series of rate hikes.
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.
Chicago PMI, Tankan Manufacturing and Non-Manufacturing Indexes
From the US there is only one significant economic data release – the Chicago PMI. First of all, the Chicago Purchasing Managers Index, released by ISM-Chicago, Inc, captures business conditions across Illinois, Indiana and Michigan. This index is an indicator of business trends and it is interrelated with the ISM manufacturing Index. It is widely used to indicate the overall economic condition in US. From Japan the Tankan Manufacturing and Non-Manufacturing Indexes are due. The Tankan Non-Manufacturing Index, released by the Bank of Japan, presents overall conditions of the service industry in Japan. It is an indicator for both the growth of domestic demand and the health of the non-export sector. The Tankan Large Manufacturing Index, released by the Bank of Japan, presents overall business conditions of the large manufacturing companies in Japan. It is an indicator of the Japanese economy as Japan heavily relies on the manufacturing industry that leads growth for the export-oriented economy.USD/JPY keeps sliding down
The Greenback's losses against the Japanese Yen yesterday were limited, due to the ADP Employment Change data beating expectations. Nonetheless, the USD/JPY currency pair remains under pressure, with the weekly PP and the 20-day SMA, namely the closest resistance cluster, continuing to weigh on Buck. The bearish momentum is still expected to last until the exchange rate reaches the current descending channel's support line near the 110.50 level. The only obstacle on the given pair's path is support area circa 111.60, represented by the weekly S1 and the lower Bollinger band.Daily chart
The US Dollar attempted to regain the bullish momentum yesterday, but the 200-hour SMA still kept the USD/JPY currency pair at bay. Unless this level is pierced, the Greenback is expected to continue falling down, until the March low of 110.66 is reached.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 59% of open positions are long, compared to 57% on Wednesday. The sentiment as reported by SAXO Bank remains bullish, slightly weaker than on Wednesday - 58% of currently open positions are long, down from 60%.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 114 yen
The majority (59%) now assumes that the US Dollar is to cost less than 114.00 yen after three month time. The most popular choice implies that the Greenback is either to cost somewhere between 106.50 and 108.00 yen in three months, selected by 23% of the voters. According to the votes collected between March 01 and March 31, the mean forecast for July 01 is 112.76. At the same time, 11% of the surveyed believe the Greenback could cost between 117.00 and 118.50 yen in three months.
Dukascopy Community members have lost their faith in the currency pair, as following a drop to 50% in the army of bulls, this week the number of bullish votes slipped to 46.2%. A vast majority of traders believe that the pair will end this week around 112.7-mark, thus practically unchanged from the price at the moment of writing.
A trader with the Dukascopy Community, megajorko, believes that the US Dollar could still appreciate against the Japanese Yen. "This week's Friday will be the last in this month when there will be GDP announcements. After the strong sell off of the USD a correction is expected. The yen is starting to gain some power but it is in deep overbought levels so I am expecting a good correction this week," megajorko commented.
At the same time, Likerty suggests that more bearish momentum could follow. He said that "the USD/JPY is showing intentions to test the lows before deciding whether to proceed with its overdue bullish correction towards 117 and above."