- 52% of all pending orders are to buy the USD
- Bullish market sentiment returned to its Wednesday's level of 72%
- The weekly S3 at 104.53 represents immediate resistance
- Support is around 103.87
- 51% of the survey participants expect the US Dollar to cost more than 112.50 yen in three months
- Upcoming events: US Building Permits, US Housing Starts, UK Public Sector Net Borrowing, Fed Chair Yellen Testimony
The US Dollar's performance was equal to the Sterling's, as the Buck outperformed some major currencies, but also declined against the others. Similarly to the Pound, the Greenback surged 0.61% higher against the Aussie, 0.43% versus the Loonie, 0.37% against the Swiss Franc and 0.30% versus the Euro. The USD/JPY currency pair plunged 1.65%, due to the BoJ's monetary policy decision, while the NZD/USD edged 0.14% higher. The Cable, however, remained almost completely unchanged.
The US consumer prices softened in the previous month, but still posted increases in housing and healthcare costs thus supporting inflation, which could still allow Federal Reserve to raise interest rates during the current year. According to the Labour Department release made on Thursday, consumer price index advanced 0.2% in May after rising 0.4% in April. Meanwhile, on a yearly pace, the CPI added 1.0% after accelerating 1.1% in April. Economists, in turn, predicted the CPI to gain 0.3% last month and advance 1.1% from a year ago. The overall increase in consumer prices could be explained by higher gasoline prices as well as rising rents. The so-called core CPI, which do not include food and energy costs, in turn, went up 0.2% in line with April data. That took the year-on-year core CPI rise to 2.2% from 2.1% in April.
In the meantime, another report released in the same day posted an advance in the number of Americans applying for unemployment benefits last week. Moreover, the trend remains to be consistent implying a healthy labour market. The following data came a day after the Fed lowered its assessment of the jobs market and suggested a lower probability of interest rate hikes. The Fed has a 2% inflation target and tracks an inflation measure which is currently at 1.6%.
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
Friday is rather poor in terms of fundamental events that can influence the USD/JPY pair today. The US Buildings Permits is one of the events that could have an impact. They show the number of permits for new construction projects. They also imply the movement of corporate investments (US economic development). The Building Permits tend to cause some volatility to the USD, normally, the more growing number of permits, the more positive it is for the US Dollar. Another event is the US Housing Starts, which is released by the US census Bureau. This data is released monthly, but is reported in an annualised format. The Building Permits slightly overshadow the Housing Starts, as they are tightly correlated.USD/JPY struggles to remain above 104.00
The BoJ's decision to leave the monetary policy unchanged caused the Yen to soar and advance 175 pips against the US Dollar. The pair left the third support area intact, having closed just under the second cluster. The Buck's goal now is to prevent the fall below 104 yen, but that might be difficult to achieve, as technical indicators suggest another decline is due. The Bollinger band is the closest support, but the main level is located at 103.34, represented by the monthly S2. At the same time, the weekly S3 acts as the nearest resistance, but is unlikely to keep the pair contained if bulls take over the market.Daily chart
The pair break out of the falling wedge pattern to the downside, but was unable to maintain trade below the 104.00 psychological level. Support around this area appears to be strong and could potentially prevent the Greenback from falling towards the 50% Fibo in the future, located at 100.72.
Hourly chart
Bullish market sentiment returned to its Wednesday's level of 72% (previously 70%), while the buy and the sell orders broke out of the perfect equilibrium. Now 52% of all pending orders are to buy the USD.
There is a small but nevertheless bullish bias among OANDA and Saxo Bank traders as well. In case of OANDA, 68% of positions opened by its clients are long. Similarly, 59% of positions opened by Saxo Bank traders are long as well, compared to 57% on Thursday.
Spreads (avg, pip) / Trading volume / Volatility
Slightly more than a half expect the exchange rate to rise above 114 yen
Exactly half of the surveyed (51%) now assume that the US Dollar is to cost more than 112.50 yen after three month time. The most popular choice implies that the Greenback is to cost higher than 117.00 yen in three months, both selected by 16% of the voters. According to the votes collected between May 17 and June 17, the mean forecast for Sep 17 is 111.69. At the same time, 15% of the surveyed believe the Greenback could cost between 112.50 and 114.00 yen in three months.
More than 61% of respondents are having bearish view on the pair, the consensus forecast stands for 105.9, meaning traders do not believe bulls will be able to close above the 200-period SMA and will finish this week right at the weekly pivot.
According to nuonrg, a trader with the Dukascopy Community, the US Dollar is to outperform the Japanese Yen, being that "on a monthly chart the USD is at support above the 104. Intraday levels have closed last week on a higher low on daily with RSI sloping up."
At the same time, PisakJanos is bearish on the matter. "Things became normal on Tuesday at 9:00 UTC (balance regained after a huge fall) and continued to decrease in the normal pace until Wednesday 8:20 UTC, (London not opened yet). Expecting to break through support at 106.256 on Monday, when FED chair Yellen speaks," he commented.