- The portion of purchase orders surged from 49 to 54%
- Bulls are barely outnumbering the bears, with 51% of traders holding long positions.
- The 55-day SMA, the Bollinger band, the 38.20% Fibo and the weekly R1 around 106.90 represent immediate resistance
- Support is at 103.90
- 52% of the survey participants expect the US Dollar to cost less than 106.50 yen in three months
- Upcoming events: 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.
US Building Permits is the only relevant event today
Today there is only one event to influence the USD/JPY pair, namely 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 struggles to remain above 106.00
The US Dollar outperformed the Japanese Yen on Monday, with the exchange rate reaching the 55-day SMA, but failing to put the anticipated 106.50 level to the test. Nevertheless, the immediate resistance cluster remains strong, with the USD/JPY pair, technically, expected to undergo a corrective decline today. The nearest support rests only around 103.80, but the 104.50 mark could also prevent the Greenback from edging lower today. Meanwhile, technical indicators are giving bullish signals in the daily timeframe, suggesting that the 107.30 point could be reached, namely the highest level of the immediate resistance cluster.The USD/JPY currency pair confirmed the ascending channel's support line yesterday, indicating the Greenback is likely to keep appreciating against the Yen. However, one obstacle still remains – the 38.20% Fibo, which is required to be overcome in order for the bullish bias to prevail.
Hourly chart
Bulls are barely outnumbering the bears, with 51% of traders holding long positions. The portion of purchase orders surged from 49 to 54%.
There is a small but nevertheless bullish bias among OANDA and Saxo Bank traders as well. In case of OANDA, 57% of positions opened by its clients are long. Similarly, 52% of positions opened by Saxo Bank traders are long as well, compared to 54% on Monday.
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 19 and July 19, the mean forecast for Oct 19 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.