- The number of purchase orders increased from 47 to 70%
- There are 72% of traders holding long positions
- The 55-day SMA, the monthly PP, the weekly R1 and the down-trend around 112.30 represent immediate resistance
- Support is around 110.30
- 61% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: US Durable and Core Durable Goods Orders, US Markit Services PMI, US CB Consumer Confidence
The Greenback weakened against most major peers on Monday, as a result of a poor reading of the US New Home Sales. The largest losses were registered against the Japanese Yen (0.53%) and the Sterling (0.52%), followed by lesser declines of 0.40% and 0.37% against the Euro and the Swissie, respectively. Commodity currencies had trouble outperforming the Buck, as the AUD/USD remained relatively unchanged, having edged 0.06% lower, while the NZD/USD edged down 0.05%. At the same time, the US Dollar managed to outperform the Loonie, but with gains being limited (0.05%).
New US single-family home sales unexpectedly fell in March, but the decline was mainly concentrated in the West region, implying that the housing market continued to strengthen. According to the Commerce Department, sales of newly built homes in the US unexpectedly dropped 1.5% to 511,000 on an annual pace, reaching a three-month low despite better supplies as well as lower prices. Meanwhile, economists had expected a rise of 1.6% to an annualised pace of 520,000 homes. Despite a considerable slide in new construction in March, the positive tendency still could be observed, since the data is 14% higher compared to the preceding year, signalling a continued strength of the US economy. March's sales pace put the market on track to overshoot 2015's total 501,000 new homes, the highest annual level since 2007. The report also showed inventory expanded to its highest level since September. Based on the current sales pace, it would take 5.8 months to exhaust the supply of newly built homes, compared with 5.6 months in the previous month. The total number of new homes for sale at the end of the month was 246,000, the highest figure since September 2009.
Meanwhile, the median price of a newly built home plunged to $288,000 from $297,400 in February. That was down 1.8% from a year earlier.
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 Durable and Core Durable Goods Orders, US Services PMI and US Consumer Confidence
Today all attention is focused on US fundamentals, such as the Durable and Core Durable Goods Orders. The Durable Goods Orders are released by the US Census Bureau and measure the cost of orders received by manufacturers for durable goods, which means goods planned to last for three years or more, such as motor vehicles and appliances. As those durable products often involve large investments they are sensitive to the US economic situation. The final figure shows the state of US production activity; meanwhile, Core Durable Goods Orders exclude the transport sector. Another important event is the US Consumer Confidence, released by the Conference Board, captures the level of confidence that individuals have in economic activity. A high level of consumer confidence stimulates economic expansion, while a low level drives to economic downturn. The final event to have an impact is the US Services PMI, released by Markit Economics, which captures business conditions in the services sector. As the services sector dominates a large part of total GDP, the services PMI is an important indicator of the overall economic condition in the US.USD/JPY in limbo ahead of US fundamentals
The US Dollar was unable to post gains against the Japanese Yen or pierce the 55-day SMA on Monday, resulting in a 63-pip loss over the day. The USD/JPY currency pair remained above the 111.00 mark, but now risks edging even lower, unless the demand area around 110.30 in face of the 20-day SMA, the weekly PP and the monthly S1 is sufficient to cause the bullish momentum to return. The upward border is still represented by the 55-day SMA and the trend-line, which is bolstered by the monthly PP, the Bollinger band and the weekly R1. Meanwhile, technical indicators are giving mixed signals, unable to confirm either scenario.Daily chart
Ever since the USD/JPY currency pair reached the highest level in three weeks during the weekend, the bullish momentum has been fading. The pair now risks remaining below the 111.00 mark, while the intraday low is expected to be capped by the 110.20 level, unless fundamentals surprise today.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 60% of open positions are long, compared to 62% on Monday. The sentiment as reported by SAXO Bank barely remains bullish - 54% of currently open positions are long, compared to 53% on Monday.
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 (28%) of the voters. According to the votes collected between March 26 and April 26, the mean forecast for July 26 is 113.44. At the same time, 18% of the surveyed believe the Greenback could cost between 115.50 and 117.00 yen in three months.