- 73% of traders having a positive outlook towards the American Dollar
- The 55-day SMA, the monthly PP and the down-trend around 112.30 represent immediate resistance
- Support is around 110.35
- 61% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: US New Home Sales, US Durable and Core Durable Goods Orders, US Markit Services PMI, US CB Consumer Confidence
The Greenback mostly retained its strength on Friday and on the weekend, as it appreciated against most major currencies. The US Dollar added 2.13% versus the Japanese Yen, the highest USD cross rally, amid rumours of the BoJ implementing negative loan rates. Lesser gains of 0.88%, 0.55%, 0.36% and 0.35% were registered against the Kiwi, the Euro, the Aussie and the Swissie, respectively, whereas the Buck edged 0.59% lower against the Sterling, as confidence of ‘Bremain' was higher. The US currency also edged lower versus the Canadian counterpart, due to Canadian CPI and Retail Sales data both beat expectations.
Activity in the US manufacturing sector unexpectedly declined in April, showing its weakest upturn since September 2009. Markit said that its flash manufacturing PMI for April fell to 50.8, the lowest level since September 2009, from the previous month's final reading of 51.5, missing expectations for a gain to 52.0. Softer output and new business growth along with a weaker increase in employment were the main factors weighing on the index. The US manufacturing sector had been undermined by the strong Dollar, sluggish global growth and excess supply.
The data extend a streak of increasingly disappointing fundamentals that have prompted Wall Street analysts to sharply lower their expectations for GDP growth early this year. Few expect the economy to grow even as little as 1% after an already disappointing end to 2015. Fed policy makers are expected to keep interest rates steady when they meet this week, but may tweak their description of the economic outlook to reflect more benign conditions, leaving the door open for future rate rises. Though the economy is creating jobs and consumer prices have climbed, providing support for a Fed interest rate hike, weakness in retail sales and international trade, as well as concern about China's economy, are among reasons Fed Chair Janet Yellen will remain cautious about further rate hikes before the second half of the year.
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 New Home Sales is the only potential driver today
Among important economic data releases there is only one event to have some impact on the USD/JPY currency pair today, which is the US New Home Sales. The number of New Home Sales, released by the US Census Bureau, is an important measure of housing market conditions. House buyers spend money on furnishing and financing their homes, so as a result the demand for goods, services and the employees is stimulated.USD/JPY struggles to retake 112.00
The USD/JPY currency pair overperformed on Friday, as the Japanese Yen lost more than 200 pips against the Buck on the negative loan rate rumours. The Greenback, however, now faces a tough resistance area around 112.30, namely the 55-day SMA, the down-trend and the monthly PP, which is likely to cause the pair to make a U-turn. In this case the monthly S1, the weekly PP and the 20-day SMA are to provide support around 110.35, but technical indicators in the daily timeframe are unable to confirm this scenario. As a result, the US Dollar could still recover from its intraday low and surge approximately 50 pips, putting the down-trend to a full-scale test.Daily chart
Friday's rally caused the possible resistance trend-line to be pierced, resulting in the pair approaching the bigger picture down-trend. However, the bullish momentum appears to be fading, as the USD/JPY currency pair struggled to reach the 112.00 major level. In either case, there is sufficient room for a rally to retake the 112.00.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 62% of open positions are long, compared to 64% on Friday. The sentiment as reported by SAXO Bank barely remains bullish - 53% of currently open positions are long, compared to 55% on 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 (61%) 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 (29%) of the voters. According to the votes collected between March 25 and April 25, the mean forecast for July 25 is 113.44. At the same time, 17% of the surveyed believe the Greenback could cost between 115.50 and 117.00 yen in three months.