- The share of sell orders edged down from 70 to 51%
- 55% of traders are long the Buck
- The 55-day SMA, the Bollinger band and the 38.20% Fibo around 106.50 represents immediate resistance
- Support is at 104.15
- 52% of the survey participants expect the US Dollar to cost less than 106.50 yen in three months
- Upcoming events: US NAHB Housing Market Index, US Building Permits, US Housing Starts
US industrial production rose more than expected in June on large gains in automotive manufacturing and utility output, reported the Federal Reserve, a sign that the economy was regaining momentum at the end of the second quarter. Industrial production, a broad gauge of output across American factories, mines and power plants, rose 0.6% month-on-month during the sixth month of year, compared to the 0.4% downturn seen in May, when it fell to red figures. Economist forecasted a 0.2% increase in June. It has shown halting signs of improvement after a downturn over the past 18 months caused by weak global demand, a strong dollar and the fall in oil prices.
However, manufacturing output rose 0.4% in June after an upwardly revised 0.3% fall in May, while production of consumer goods rose 1.1%. Output of automotive products jumped 5.9%, while machinery output was up 1.1%. Output of computers, electronics and appliances increased 1.5%. Moreover, with overall output up, the percentage of industrial capacity in use rose to 75.4% in June from an unrevised 74.9% in May. The Fed sees capacity use as a leading indicator in deciding how much further the economy can grow before sparking higher inflation.
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.
NAHB Housing Market Index is the only relevant event
Monday is really quiet in terms of economic data releases, with the only relevant event being the US NAHB Housing Market Index. It presents homes sales and expected home buildings in the future, indicating housing market trend in the US. The growth rate of the housing market affects the USD volatility. On Tuesday the US Building Permits are due. They show the number of permits for new construction projects. It implies the movement of corporate investments (US economic development). It tends to cause some volatility to the USD.USD/JPY in tight range between 104.50 and 106.50
At the end of last week the US Dollar appreciated against the Yen in wake of strong US fundamental data, but ultimately erased all gains, as supply, represented by the immediate resistance cluster, was too tough to pierce. The same area keeps providing resistance today, thus, any upside development is expected to be limited around 106.50. Technical indicators are also in favour of the bullish outcome, but another decline is quote possible, with the lower border being the monthly PP at 104.36 and the 104.50 mark acting as a psychological support as well, bolstering the pivot point.The USD/JPY currency formed a new ascending channel pattern, this time confirm the upper border more than once. On the hourly chart, the upper boundary is the 106.65 level, namely the 38.20% Fibo, rather than the 106.50, as on the daily chart. Consequently, the 105.50 level is likely to prevent the pair from edging significantly lower.
Hourly chart
For the sixth time in a row bulls lost some numbers, barely remaining in the majority, namely taking up 55% of the market (previously 57%). Meanwhile, the share of sell orders edged down from 70 to 51%.
There is a small but nevertheless bullish bias among OANDA and Saxo Bank traders as well. In case of OANDA, 59% of positions opened by its clients are long. Similarly, 54% of positions opened by Saxo Bank traders are long as well, compared to 53% on Friday.
Spreads (avg, pip) / Trading volume / Volatility
Slightly more than a half expect the exchange rate to fall below 106.50 yen
Slightly more than half of the surveyed (52%) now assume that the US Dollar is to cost less than 106.50 yen after three month time. The most popular choice, however, implies that the Greenback is to cost between 108.00 and 109.50 yen in three months, selected by 26% of the voters. According to the votes collected between June 18 and July 18, the mean forecast for Oct 18 is 105.63. At the same time, 11% of the surveyed believe the Greenback could cost between 100.50 and 102.00 yen in three months.