- The majority of all pending orders (83%) are to sell the Buck
- 73% of traders still hold long positions
- The monthly S2 and the weekly PP around 108.70 represent immediate resistance
- Support is around 107.65
- 55% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: FOMC Member Dudley Speech, US NAHB Housing Market Index, US Building Permits, US Housing Starts
A poor reading of the US Preliminary UoM Consumer Sentiment caused the US Dollar to weaken against most major currencies. The largest decline of 1.05% was registered against the New Zealand Dollar, also triggered by a strong reading of the NZ CPI. The Buck also dropped 0.59% against the Yen, amid the return of risk aversion, followed by a 0.38% versus the Aussie and 0.34% against the Sterling. Lesser slumps of 0.17% and 0.15% were detected against the Loonie and the Euro, respectively. The only rally of 0.10% was seen against the Swiss Franc.
US industrial production declined more than expected in March as output dropped broadly, the latest sign that economic growth faltered in the first quarter. Industrial output fell 0.6% last month following a downwardly revised 0.6% decrease in February, according to the Federal Reserve. Industrial production slipped at an annual rate of 2.2% in the first quarter. The report joined data on retail sales, business spending, trade and wholesale inventories in indicating that economic growth slowed at the turn of the year. Growth estimates for the first quarter are as low as a 0.2% annualized rate. The world's number one economy grew at a 1.4% rate in the fourth quarter. However, given a strong labour market, the slowdown in growth is likely to be temporary.
A separate report showed US consumer confidence unexpectedly declined in early April for the fourth straight month, as concerns about surging gasoline prices and the broader economy weighed on sentiment. The Thomson Reuters/University of Michigan preliminary Consumer Confidence Index slid to 89.7 points in April, compared with the final 91.0 reported in March, when it had dipped to a fresh five-month low. The Current Economic Conditions sub-index ticked down to 105.4, down from 105.6 in March, while the Index of Consumer Expectations plunged to 79.6 in April, sharply lower than 81.5 reported previously.
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 NAHB Housing Market Index is the only event to have an impact on the USD/JPY
The only relevant event today is the US NAHB Housing Market Index, which is released by the National Association of Home Builders. It presents home sales and expected home buildings in the future indicating housing market trend in the United States. The growth rate of the housing market affects the USD volatility. However, tomorrow attention should be paid to the US Building Permits. The Building Permits, released by the US Census Bureau, at the Department of Commerce, shows the number of permits for new construction projects. It implies the movement of corporate investments (US economic development). It tends to cause some volatility to the USD.USD/JPY approaches 18-month low
The USD/JPY's correction has been short-lived, as the pair weakened on Friday and opened with a bearish gap on Monday. The 18-month low at 107.63 now once again is under the risk of being pierced. Although technical indicators support the negative outcome, the weekly S1, which is bolstering the 18-month low, could provide sufficient support to at least limit the dips. In case the immediate support area is breached, the Greenback should then continue falling towards the second target, namely the cluster around 106.65, represented by the monthly S3, the Bollinger band and the weekly S2.Daily chart
The USD/JPY currency pair began to decline on Friday, continuing to fall back towards the 18-month low. As a result, risks of the pair establishing a new 18-month low returned, unless positive fundamentals trigger a buying spree.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 54% of open positions are long, compared to 67% on Thursday. The sentiment as reported by SAXO Bank remains bullish - 60% of currently open positions are long, unchanged since Friday.
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 (55%) 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 (26%) of the voters. According to the votes collected between March 18 and April 18, the mean forecast for July 18 is 113.06. At the same time, 12% of the surveyed believe the Greenback could cost between 106.50 and 108.00 yen in three months.