- The share of sell orders increased from 52 to 57%
- Bulls still take up 74% of the market
- The 20-day SMA, the monthly S2 and the weekly R1 around 109.05 represent immediate resistance
- Support is at 107.63
- 65% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: US Core PCE Price Index, US Employment Cost Index, US Personal Spending and Income, Chicago PMI, US Revised UoM Consumer Sentiment, US Treasury Currency Report
Although the US Annualized GDP data disappointed yesterday, the Greenback was able to limit the losses against major peers. The two exceptions were versus the Japanese Yen, against which the US Dollar slumped 3.01% due to the BoJ's decision to leave monetary policy unchanged, and against the New Zealand Dollar, as the Buck edged 1.76% lower against it. Mild losses of 0.46%, 0.45%, 0.44%, 0.35% and 0.26% were registered against the remaining major currencies, namely against the Aussie, the Swissie, the Pound, the Loonie and the Euro, respectively.
The US economy expanded in the first quarter at the slowest pace in two years due to a sharp pullback in business investment and sluggish global demand. Gross domestic product rose at a 0.5% seasonally adjusted annual rate in the first quarter, according to the Commerce Department. This is the government's first of three estimates for the quarter before annual revisions in July. Consumers and the housing market kept the US economy from sliding backward, albeit only barely. Among the forces working against the US growth in recent months was a lacklustre demand from overseas and a strong Dollar that have led to a decline in exports, subtracting from growth.
After its meeting earlier in the week, the Fed provided a mixed review of the economy, saying in its statement that economic activity had slowed despite labour market improvement. Though the US central bank had entered the year with the plan to hike interest rates several times, it has so far refrained from any moves, a response to overseas volatility, particularly in China, and to the contradicting signals about US economic health. Analysts say the Fed could still decide to raise interest rates at its next meeting in June. The International Monetary Fund, in mid-April, estimated that the US economy would grow by 2.4% this year, slightly better than the pace of other developed economies.
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 Core PCE Price Index, US Personal Spending and Income
The most important events today are from the US side, such as the US Core Personal Consumption Expenditure. Released by the US Bureau of Economic Analysis, it is an average amount of money that consumers spend in a month. "Core" excludes seasonally volatile products, such as food and energy, in order to capture an accurate calculation of the expenditures. It is a significant indicator of inflation. Furthermore, the US Personal Spending and Income should also be in focus. The Personal Spending measures purchases of goods and services by households and by non-profit institutions that serve households from private businesses. As for Personal Income, it measures the total income of individuals, received from all sources, including wages and salaries, interest, dividends, rent, workers' compensation, proprietors' earnings and transfer payments. This figure can provide insight on the US employment situation.USD/JPY retains post BoJ weakness
The American Dollar suffered a heavy loss on Thursday, triggered both by the BoJ's decision and a poor reading of the US GDP. Even though the USD/JPY currency pair managed to close trade above the 108.00 major level, the 18-month low is still under the risk of being violated. Unless demand at this low is insufficient to trigger a rebound, the next target will be the support cluster around 106.65, represented by the Bollinger band, the monthly S3 and the weekly S2. Meanwhile, technical indicators are unable to confirm the bearish scenario completely, but no impetus today is expected to cause the bullish momentum to return after yesterday's slump.Daily chart
According to the hourly chart, the USD/JPY currency pair is likely to continue sliding down. No significant demand area is located nearby, with the only potential level being the 19-month low of 105.17, but a drop that low just yet is doubtful.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 65% of open positions are long, unchanged since Thursday. The sentiment as reported by SAXO Bank barely remains bullish - 53% of currently open positions are long, one percentage point more from Thursday.
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 (65%) 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 29 and April 29, the mean forecast for July 29 is 113.60. At the same time, 24% of the surveyed believe the Greenback could cost between 115.50 and 117.00 yen in three months.
At the same time, for the third straight week, around 80% of respondents are having bullish view on the pair.
Meanwhile, Trendmaster, a trader with the Dukascopy Community, is bullish on the USD/JPY currency pair. "The USD/JPY trend is uncertain as both central bank from US and Japan are meeting this week. The BoJ is widely expected to cut its policy rate by 20bp to -0.3% and scale up its qualitative easing measures." He also commented that from the technical and trend view, despite the negative rate, he expects market sentiment to keep the pair bearish through the week.
On the other side of the barricade, Jignesh believes that the USD/JPY pair might end up with a significant loss. "Last week's price action on the back of an announcement from the BoJ showing some renewed commitment may have traders looking at this pair with the view that the longer term up trend may have continued. Dips should be supported in this pair as it gets bought up further this week", he commented.