- The portion of sell orders edged higher from 49 to 54%
- 72% of traders hold long positions
- The Bollinger band around 108.08 represent immediate resistance
- Support is at 107.63
- 50% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events US Treasure Sec Lew Speech, FOMC Member Dudley Speech, Fed Announcement, US Import Prices, US Federal Budget Balance
The US Dollar suffered losses against all other major currencies on Friday and over the weekend. The US Dollar declined the most against its Canadian counterpart (1.19%), as upbeat employment data boosted the Loonie on Friday. The Greenback also edged significantly lower versus the other two commodity currencies, namely 0.62% against the Aussie and 0.47% versus the Kiwi, followed by a 0.49% slump against the British Pound. The US currency held most resilient against the Yen, the Euro and the Swissie, having edged 0.13%, 0.17% and 0.23% lower against them, respectively.
Machinery orders plunged in Japan in February, offsetting most of January's unprecedented gains, in further signs the world's third biggest economy may need more stimulus. Japan's machinery orders excluding ships and utility items, tumbled a seasonally-adjusted 9.2% month-on-month in February, according to the Cabinet Office, after surging 15% in January. Analysts, however, expected an 11.9% decline in machinery orders in February. Compared with a year earlier, core orders dropped 0.7% in February, less than a median estimate for a 2.7% decline.
In the December quarter the economy contracted 0.3%, led by a slump in consumer spending, while growth indicators so far for the March quarter suggest the economy may have slipped back into recession. Moreover, the Japanese Yen has gained more than 10% versus the US Dollar this year, thereby lowering exporters' earnings. Economists expect the Bank of Japan to soon take action against the surging Yen, particularly as inflation is already non-existent, either by expanding the central bank's Qualitative and Quantitative Easing programme or by slashing interest rates again. The BoJ shocked markets in January by deciding to add negative interest rates to its massive asset-buying programme, but the move has failed to underpin stock prices or arrest an unwelcome surge in the currency.
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.
Relatively quiet Monday
There are no fundamental economic data releases due, but FOMC Member Dudley and Treasury Sec Lew are both scheduled to speak later today. Their speeches might have some impact on the Cable, but the most important event will be the Fed Announcement, where the Fed releases information about monetary policy. This statement contains information about policy decisions, economic conditions, which is important for investors. However, tomorrow attention should be paid to a number of US releases yesterday. The first event will be the US Import Price Index, released by the US Department of Labor, which informs the changes in the price of imported products into the US. The higher the cost of imported goods, the stronger the effect they will have on inflation, redunding in a higher probability of a rate rise. Finally, the Monthly Budget Statement, which is released by the Financial Management Service, and summarizes the financial activities of federal entities, disbursing officers, and Federal Reserve banks. A positive budget statement that receipts exceed budgetary outlays is seen as bullish for the USD.USD/JPY remains on the back foot
The US Dollar was unable to maintain trade above the 109.00 major level on Friday, ultimately retreating and closing with a 15-pip loss. The same resistance is likely to keep the USD/JPY pair from advancing today as well, namely the monthly S2 at 108.70, whereas the Bollinger band around 108.08 is providing immediate resistance. However, the chance of the nearest resistance getting pierced is relatively high, as the Greenback is support by a fresh 18-month low of 107.63. A breach of this level could trigger a sell-off, leading the exchange rate towards the monthly S3 and the weekly S1 at 106.60. Meanwhile, technical indicators are unable to confirm either scenario.Daily chart
The US Dollar was unable to return above the support line on Friday, which caused the USD/JPY to continue falling even deeper. However, the 18-month low of 107.63 keeps providing support and preventing the given pair from edging lower, but with the breach of the trend-line a sharper slump beyond 107.63 is possible.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 63% of open positions are long, compared to 65% on Friday. The sentiment as reported by SAXO Bank remains bullish - 57% of currently open positions are long, down from 60% on Friday.
Spreads (avg, pip) / Trading volume / Volatility
Exactly a half expect the exchange rate to fall under 114 yen
Exactly a half (50%) 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 106.50 and 108.00 yen in three months, selected by 17% of the voters. According to the votes collected between March 11 and April 11, the mean forecast for July 11 is 113.25. At the same time, 14% of the surveyed believe the Greenback could cost between 117.00 and 118.50 yen in three months.