- 55% of all open orders are to sell the American Dollar
- 72% of traders holding long positions today
- The Bollinger band around 106.25 represents immediate resistance
- Support is around 104.30
- 66% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: US Markit Manufacturing PMI, US ISM Manufacturing PMI, US Construction Spending
The US Dollar's performance on Friday and over the weekend was almost identical to the British Pound's, with the exception of the Cable edging 0.03% higher. At the same time, the Sterling edged 0.23% lower versus the Kiwi, followed by a 0.70% loss against the Swiss Franc and 0.86% versus the Euro. The largest slump of 1.49% was registered against the Japanese Yen, which retained most of its post-BoJ meeting strength. Gains, on the other hand, accounted for 0.26% and 0.01% against the Aussie and the Loonie, respectively.
The Fed's favourite inflation barometer slowed in March, falling from one-and-a-half-year peak, while consumer spending ebbed. The price index for personal consumption expenditures excluding food and energy ticked up 0.1% in March, following a revised 0.2% gain. The rate of inflation over the past 12 months slid to 1.6%. In the previous two months, the core deflator was growing 1.7% year-on-year, the quickest pace since mid-2014. Inflation is being restrained by a strong Dollar and cheaper energy. A tightening labour market also failed to generate strong wage gains, contributing to moderate consumption growth. In March, consumer spending, which accounts for more than two-thirds of US economic activity, ticked up 0.1% after an upwardly revised 0.2% gain in February. Consumer spending is expected to pick up momentum as wages steadily rise. Personal income increased 0.4% in March after nudging up 0.1% in February.
Meanwhile, confidence among America's shoppers worsened for the fourth consecutive month in April. The Thomson Reuters/University of Michigan preliminary consumer confidence index decreased to 89.0 points in April, down from the final 91.0 reported in March, when it had dropped to a fresh five-month low. The current economic conditions sub-index improved to 106.7, while the indicator tracking future expectations declined 4.8 points to 77.6 during the reported month.
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 Manufacturing PMI and US Construction Spending
Among important economic events today the US Markit Manufacturing PMI is one of the most important ones. Released by the Markit Economics, it captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the Manufacturing PMI is an important indicator of business conditions and the overall economic conditions in the US. A reading above 50 implies the economy is expanding, making investors understood it as a bullish for the USD, whereas a result below 50 points for an economic contraction, and weighs negatively on the currency. Another event is the US Construction Spending, released by the US Census Bureau, it is an indicator that measures the total amount of spending in the US on all types of construction. The residential construction component is useful for predicting future national new home sales and mortgage origination volume.USD/JPY under the risk of slumping under 106.00
The US Dollar experienced another relatively sharp decline on Friday, falling below the 18-month low of 107.63. The Greenback now could undergo a corrective rally, despite the Bollinger band providing immediate resistance around 106.25, just above the opening price. Meanwhile, technical indicators are giving mixed signals in the daily timeframe, implying that the possibility of bullish development exists. However, weak US fundamentals might cause the USD/JPY currency pair to weaken for the third consecutive time and fall under the 106.00 psychological level.Daily chart
The US Dollar dropped beyond the 18-month low, on Friday, but managed to remain elevated above the 106.00 mark over the weekend. The USD/JPY currency pair now remains between the 18-month low and the 2014 low, awaiting for a catalyst to continue moving in either direction.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 67% of open positions are long, two percentage points higher from Friday. The sentiment as reported by SAXO Bank barely remains bullish - 54% of currently open positions are long, one percentage point more from 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 (66%) 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 115.50 and 117.00 yen in three months, selected by more than a quarter (28%) of the voters. According to the votes collected between April 02 and May 02, the mean forecast for August 02 is 113.81. At the same time, 26% of the surveyed believe the Greenback could cost between 114.00 and 115.50 yen in three months.