- 56% of orders are buy and 44% are sell commands
- Longs take up 74% of the market
- Strong resistance is seen at 110 yen (up-trend plus 200-hour SMA)
- Bearish target is 107 yen
- 52% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events: US ADP Non-Farm Employment Change (May), Unemployment Claims
Yesterday's data failed to reverse the sell-off we have been observing since Tuesday. The US Dollar underperformed most of its counterparts, gaining only relative to the Pound. Greenback fell the most versus the Japanese Yen yesterday, namely 1.07%.
The data for US ISM manufacturing data was stronger than analysts' estimations showing an advance to 51.3 (May) from 50.8 booked in the previous month. The consensus expectation, in turn was 50.5. Economic activity in the manufacturing sector expanded in May for the third consecutive month, while the overall economy grew for the 84th consecutive month, according to the ISM report. The Prices Index in turn, registered 63.5, an advance of 4.5 points from the April reading of 59, indicating higher raw materials prices for the third consecutive month. The main influence on the PMI release was raised due to the decline in production volumes. The following release shows that the sector expanded in May for a third straight month, despite the forecasts of a negative movement following several weak regional surveys. Of the 18 manufacturing industries, 12 are reporting rise in May. The top gainers are wood products, textile mills and printing & related Support Activities. However, the six industries, in turn, reported contraction in May which are: apparel, leather & allied products and petroleum & coal Products.
Speculation in recent weeks that the US Federal Reserve will raise interest rates in the next few months, concerns about Chinese economic growth as well as worries about possible British exit from the European Union, are all factors that affect global manufacturing.
Vatsal Srivastava, director at the Blackwater Consulting, explained why the US Dollar advanced against the Yen last week. He said there was nothing fundamentally driving USD/JPY on Monday, but one of the key drivers was the falling oil prices, which was actually boosting the Yen; in analyst's opinion, as there was an addition cause for more QQE. Vatsal Srivastava also mentioned 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 summed up.
Both new jobs and new claims set to rise
If the estimates are be correct, today's data will show mixed tendencies in the US labour market. On the one hand, ADP's report is to show 174K new jobs after 156K created workplaces a month ago. On the other, the number of initial unemployment claims is to rise 2K from 268K reported a week earlier.USD/JPY pierces through 110, targets 107
As it turned out, a failure of the pair to reach the upper bound of the recently formed pattern on Tuesday led to a breach of support at 110 yen, where the up-trend line is joined by the 55-day SMA and weekly PP. The near-term outlook is therefore strongly negative, while Dollar's longer-term intentions are likely to be defined by its reaction to a test of 107 yen, where the monthly S1 coincides with the 38.2% Fibonacci retracement level of the 2012-2015 rally.Daily chart
The only significant supports now standing between the spot and 107 yen are the week S2 and S3 levels at 108.60 and 108.15, respectively, and there we may expect bullish intraday reaction.
Hourly chart
SWFX traders remain strongly bullish, while elsewhere the sentiment is becoming neutral
In the meantime, traders took advantage of a cheaper Dollar and increased the amount of long trades to 74% of the total amount in the market. As for the pending orders placed 100 pips from the spot price, 56% of them are buy and 44% are sell commands.
There are considerably less bulls among OANDA and Saxo Bank clients. In the first case, 58% of positions open in USD/JPY are long. There are even fewer longs at Saxo Bank, where 53% of clients are expecting to profit from Dollar's appreciation.
Spreads (avg, pip) / Trading volume / Volatility
Slightly more than a half expect the exchange rate to fall under 114 yen
Slightly more than a half of the surveyed (52%) now assumes that the US Dollar is to cost less 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 (27%) of the voters. According to the votes collected between April 27 and May 27, the mean forecast for August 27 is 110.95. At the same time, 16% of the surveyed believe the Greenback could cost between 115.50 and 117.00 yen in three months.
Dukascopy Community members are optimistic with respect to USD/JPY - 64% of them are bullish on the currency pair, and the average forecast for the end of the week is 111.60 dollars.
One of the bulls, megajorko, does not see dominance of either buy or sell signals, but suspects that "the pair will try to show similar path as the EUR/USD, being attracted by the magic 111.111 number".
In the meantime, Jignesh expects the Yen to strengthen, saying that "central bank are not happy with the BOJ intervening in the markets", which means a probable decline in USD/JPY.