- 52% of orders are to acquire the US Dollar
- 65% of all open positions are short
- The nearest resistance is at 114.25
- Immediate support rests at 113.38
- Upcoming events: US Empire State Manufacturing Index, US Building Permits, US Housing Starts, US Capacity Utilization Rate, US Industrial Production
Manufacturing activity in the New York state deteriorated unexpectedly in May, falling into the negative territory for the first time since October, official figures revealed. The regional Federal Reserve reported on Monday that its Empire State Manufacturing Index came in at –1.0 in the reported month, following the preceding month's 5.2 points. Meanwhile, market analysts anticipated a climb to 7.2 in May. The drop may be a sign of an activity slowdown in the manufacturing sector. Back in February, the New York Fed Index hit 18.7 points, the highest level since September 2014, boosted by optimism over the US President Donald Trump's pro-growth initiatives.
However, the following Trump momentum began to wane, as the White House failed to deliver on key promises. The New Orders Index came in at -4.4, down from April's 7.0 and marking the weakest level since September. The Employment Index declined slightly to 11.9 from 13.9 points registered in the prior month. Indexes assessing the six-month outlook was little changed, falling from 39.9 to 39.13 points in May.
US Building Permits, Capacity Utilization Rate and Industrial Production
Once again relevant data is only from the US side, such as the Building Permits, which show the number of permits for new construction projects. It implies movements of corporate investments and tends to cause some volatility to the USD. Another event worth paying attention to will be the USD Capacity Utilization Rate. It is the percentage of the US production capacity which is actually used over the short-timer period. It is indicative of overall growth and demand in the US economy. A high capacity utilization stimulates inflationary pressures. Finally, the Industrial Production, which shows the volume of production of US industries, such as factories and manufacturing. Up-trend is regarded as inflationary, which may anticipate interest rates to rise. If high Industrial Production growth comes out, this may generate a positive sentiment for the USD.
USD/JPY continues to weaken
A relatively strong recovery yesterday was almost sufficient to erase Friday's losses completely, leaving the USD/JPY pair just few pips away from that day's opening price. The Buck, however, remains under pressure and is likely to slide down due to a stronger Yen. The weekly pivot point is now the immediate support, but the cluster around 112.90 is much more reliable. A failure to find support around this area would open the way towards the 112.00 major level, where the 20-day SMA coincides with the 55-day one, but a plunge that far is out of reach for now.Daily chart
Although the USD/JPY currency pair remained relatively unchanged on Monday, the 200-hour SMA still kept providing support in a small bullish direction. However, the Greenback is reluctant to reclaim the 114.00 level or maintain trade above it if a surge over it occurs. The SMA is still expected to keep providing support, but there are risks of a downside break, due to the SMA changing direction as well.
Hourly chart
Traders remain bearish towards the Greenback, as 65% of all open positions are currently short. At the same time, there are 52% of orders to acquire the US Dollar, up from 50% yesterday.
Right now 49% of OANDA clients are bulls, losing щту percentage points from before, first time the sentiment turned bearish in a long time, even though just a little. In the meantime, Saxo Bank clients manage to retain a neutral outlook towards the US Dollar, being that 51% of their open positions are now long and the remaining 49% are short.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish on the Dollar
According to the poll that gathered forecasts between April 16 and May 16, traders expect the US Dollar to appreciate to 111.28 yen in three months' time, while the forecast for March 31 was 117.66 yen. It is also worth noticing that 57% of all forecasts fall above 111 yen, which is still below the current spot price. The majority of people who voted expect the US Dollar to cost somewhere between 112.50 and 114.00 yen in three months, with 17% of the survey participants choosing this trading ranges. At the same time, the second most popular intervals were the 114.00-115.50 and the 115.50-117.00 ones, with 13% of survey participants forecasting each of these trading ranges.