- Share of buy orders inched up to 53%
- Bulls are in majority with 66% of the market
- Current target is 100.80/70
- Upside is limited by 102.65/16
- 61% of the survey participants expect the US Dollar to cost less than 105.00 yen in three months
- Upcoming events: US Unemployment Claims, Crude Oil Inventories
The US service sector expanded at the slowest pace in more than six years, official data revealed on Tuesday. The Institute for Supply Management said that its Non-Manufacturing PMI dropped to 51.4 points in August from the preceding month's 55.5, whereas market analysts anticipated a slight decrease to 55.4 in the reported month. Last month's reading was the weakest since February 2010. Nevertheless, readings above 50 points indicate an expansion in the services sector, and the US service sector grew for 79 consecutive months. Furthermore, the Non-Manufacturing Business Activity Index fell to 51.8, compared to July's reading of 59.3, showing growth for 85 straight months.
The New Orders Index declined to 51.4, following the previous month's 60.3. The Employment Index decreased to 50.7 percent from the July reading of 51.4. The Prices Index came in at 51.8 in August, down from the preceding month's reading of 51.9, reflecting growth for the fifth consecutive month. According to the ISM, 11 out of 18 non-manufacturing sectors reported growth last month. After the data release, the EUR/USD pair was seen trading at $1.1213 from around $1.1159 ahead of the release, whereas the GBP/USD pair was at $1.3404 from $1.3367 prior.
Will Unemployment Claims surprise for a fifth time in a row?
Now that the data from Japan is out of the way, with GDP beating the expectations and with the Yen outperforming the Dollar afterwards, the focus is to shift to the US Unemployment Claims. According to the consensus in the market, the figure is to come in at 264K, just one thousand over the previous reading. It is worth noticing that this release surprised to the upside the last four previous weeks. If this is the case, we may finally expect the US Dollar to stabilise.USD/JPY eyes 100.80/70
USD/JPY consolidates under the monthly PP and 55-day SMA, implying that the bears will soon resume their push lower, while the upside should be limited by a wide but dense supply zone between 102.65 and 102.16. The current target is 100.80/70, but additional Dollar weakness is seen as unlikely, considering that this demand area is the 50% retracement of the 2012-2015 up-move, which is reinforced by the monthly S1 and weekly S2. Moreover, it is close to an important psychological level of 100 yen.Daily chart
In the hourly chart, the pair is also actively looking for footing after plummeting 2.7% since the beginning of the week, which was partially due to the resistance trendline at 104.20 and partially due to the head and shoulders pattern. Here the closest notable level is at 101 yen, represented by the support line that was formed during the second half of August.
Hourly chart
Yesterday's depreciation of Dollar did not affect the distribution between the bulls and bears, who still take up 66 and 34% of the market respectively. As for the buy orders, their share went up, but insufficiently to create a distinguishable gap from the sell orders.
A similar situation is observed at Saxo Bank, where two thirds of traders prefer to be long the US Dollar against the Japanese Yen, up five percentage points from 62% recorded yesterday. The share of bulls increased at Canada-base broker as well, but to a lesser degree, namely from 61 to 63%.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall below 105.00 yen
Slightly more than half of the surveyed (61%) now assume that the US Dollar is to cost less than 105.00 yen after a 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 17% of the voters. According to the votes collected between Aug 02 and Sep 02, the mean forecast for December 02 is 103.43. At the same time, 13% of the surveyed believe the Greenback could cost either between 103.50 and 105.00 yen or even more than 109.50 yen in three months.