- The number of orders to acquire the American Dollar increased from 57 to 62%
- Bullish market sentiment returned to its last Monday's level of 70%
- Resistance is around 114.90
- Immediate support is at 113.45, namely the weekly PP and the 20-day SMA
- 56% of the survey participants expect the US Dollar to cost less than 117 yen in three months
- Upcoming events: US Labor Market Conditions Index, FOMC Members Brainard and Fischer Speeches, US Consumer Credit, Japanese Current Account, Japanese Final GDP
In spite of a strong reading of the US NFP data, the Greenback declined against most major peers, with exception against the Swissie and the Yen. The Buck added 0.05% and 0.04% versus the Swiss Franc and the Yen, respectively, whereas the largest losses of 1.36% were seen against the Kiwi and 1.18% versus the Aussie. Against third commodity currency, namely the Loonie, the US Dollar edged 0.65% lower. At the same time, mild losses of 0.37% and 0.45% were recorded against the Sterling and the Euro, respectively.
Bank of Japan Governor Haruhiko Kuroda said that the central bank will study the effects of negative interest rates on the world's third biggest economy, indicating that no immediate expansion of stimulus was planned. Kuroda also remained upbeat on Japan's economic growth outlook, countering criticism that the central bank's decision to introduce negative interest rates has had little positive impact on markets. Yet, the central banker reiterated that the BoJ stands ready to ease monetary policy again, either by accelerating asset purchases or pushing rates deeper into negative territory, if needed to reach the 2% price goal. Kuroda also added that current negative rates would have a "very powerful" stimulus effect on the Japanese economy by driving down borrowing costs and encouraging firms to boost investment. The "Abenomics" economic strategy of Prime Minister Shizno Abe relies on central bank stimulus to underpin growth, but Abe said that the BoJ has adopted negative interest rates of its own accord, and denied that his policy was unsuccessful, despite low growth and weak inflation.
The BoJ unexpectedly cut the benchmark interest rates below zero in January, as turbulent markets and slowing global growth threaten its efforts to overcome deflation.
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 Consumer Credit Change is the only relevant event today
There are no significant economic data releases from the US on Monday or on Tuesday. However, what is likely to cause some volatility is the US Consumer Credit Change. The Consumer Credit is released by the Board of Governors of the Federal Reserve and is an amount of money that individuals borrowed. It shows if consumers can afford large expenses, which can fuel economic growth. However, a high figure may also indicate that the economy is overheating, as consumers borrow in order to live beyond their means. Concerning Japan, the GDP figures are due early morning on Tuesday, which are likely to set the mood for the Asian session that day. The GDP is released by the Cabinet Office and shows the monetary value of all the goods, services and structures produced in Japan within a given period of time. GDP is a gross measure of market activity because it indicates the pace at which the Japanese economy is growing or decreasing.USD/JPY keeps struggling to overcome 114.00
The US Dollar failed to post significant gains against the Japanese Yen last Friday, as the USD/JPY pair inched only five pips higher. Although the given pair opened slightly higher today, resistance at the 114.00 psychological level appears to be holding the Buck at bay. However, the Greenback is now also supported by the weekly PP and the 20-day SMA around 113.40, where demand could be sufficient to trigger a buying spree for the 114.00 mark to be overcome. According to technical indicators, the bearish momentum is likely to prevail and push the US currency closer towards 113.00 major level.Daily chart
Although the USD/JPY currency pair continued to trade within the ascending channel's borders, attempts to breach the lower boundary were made. The bearish momentum is also prevailing since Monday morning and is likely to cause a decline towards the 113.20 level – where the 200-hour SMA lies. As a result, more losses closer towards 111.00 could follow, as the pattern is about to break.
Hourly chart
SWFX sentiment stays bullish
Traders at OANDA and Saxo Bank have a diametrically opposite view of the pair's future. Clients of both brokers are mostly bullish. Canadian-based foreign exchange company reports that 63% of open positions are long, compared to 64% on Friday, and the Danish bank reports that 59% of its clients' positions are long, compared to 58% previously.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 117 yen
The majority of the survey participants (56%) expect the US Dollar to cost less than 117.00 yen in three months. The most popular choice, however, is the 120.00-121.50 price intervals, selected by 20% of the voters. According to the votes collected between Feb 07 and March 07, the mean forecast for June 07 is 115.40. At the same time, 17% of the surveyed believe the Greenback could fall in the 111.00-112.50 price interval after a three month period.