- The number of orders to sell the American Dollar take up 58% of the market
- There are 70% of traders being long the US Dollar
- The monthly S2 and the weekly PP around 109.00 represent immediate resistance
- Support is around 107.65
- 51% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events: US Import Prices, US Federal Budget Balance, Japanese PPI
The US currency sustained losses against all major currencies, with exception against the Swiss Franc. The USD/CHF inched 0.06% higher on Monday, while the smallest declines of 0.11% were registered against the Euro and 0.12% versus the Japanese Yen. At the same time, the Greenback suffered 0.78% against the Sterling, followed by 0.72%, 0.69% and 0.59% losses against the commodity currencies, namely the Kiwi, the Loonie and the Aussie, respectively.
US consumers' expectations for inflation fell in March following a rebound from record lows in the prior month, adding to the uncertainty over how quickly the Fed can proceed with interest rate increases in the coming months. According to the Federal Reserve Bank of New York, expectations for inflation one year in the future declined to 2.53% in March, down from 2.71% in February. That was the fourth drop in the last six months and put expected inflation at just over a tenth of a percentage point above January's reading of 2.42%, the lowest level since the survey began in mid-2013. Moreover, the survey of consumer expectations predicted inflation to be 2.5% three years from now, compared with 2.6% in February. In January, expected inflation three years ahead was 2.45%, marking the lowest level since June 2013.
The Fed views inflation expectations as important information of where inflation is headed and also a reading on the credibility of its 2% inflation target. The Fed supposes too-low inflation has a sign the US economy is not firing on all cylinders and at risk of slowing. The personal consumption expenditure index, the Fed's preferred inflation gauge, climbed just 1% in the 12 months ended in February, down from 1.2% in the prior month. Inflation has been below the Fed's 2% goal since April 2012.
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 Import Price Index and Monthly Budget Statement
In the second half of the day (GMT time) the US Import Price Index and the Monthly Budget Statement are due. The Import Price Index, released by the US Department of Labor, 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 US Monthly Budget Statement, which is released by the Financial Management Service, 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 to begin climbing up
After more than a week of declines the USD/JPY remained almost completely unchanged on Monday, indicating a possible trend reversal. The 18-month low, which is now bolstered by the Bollinger band, appears to have provided sufficient support for a rebound. The Greenback is now likely to edge higher, but with the monthly S2 and the weekly PP still forming a rather strong resistance area around the 109.00 psychological level. Technical studies, on the other hand, are giving mixed signals, implying that the given pair could remain relatively unchanged for the third consecutive time today.Daily chart
Despite the breach of the trend-line, the USD/JPY currency pair was unable to fall below the 18-month low on Monday. As a result, the Buck now has the potential to reverse its bearish trend and begin appreciating towards the resistance line around 113.00.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 67% of open positions are long, compared to 63% on Monday. The sentiment as reported by SAXO Bank remains bullish - 62% of currently open positions are long, up from 57% on Monday.
Spreads (avg, pip) / Trading volume / Volatility
Exactly a half expect the exchange rate to fall under 114 yen
Slightly more than a half of the surveyed (51%) 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 16% of the voters. According to the votes collected between March 12 and April 12, the mean forecast for July 12 is 113.17. At the same time, 14% of the surveyed believe the Greenback could cost between 117.00 and 118.50 yen in three months.