- The share of buy orders skyrocketed from 45 to 78%
- 66% of traders hold long positions
- The weekly PP at 102.69 represents immediate support
- Resistance is at 103.34
- 50% of the survey participants expect the US Dollar to cost less than 109.50 yen in three months
- Upcoming events: US Core PCE Price Index, US Personal Spending and Income, US Pending Home Sales, US Crude Oil Inventories
Activity in the US services sector remained tepid in June, suggesting that the economy's underlying rate of growth remains lowly and that a rate hike may not be on the cards too soon. In a report, market research group Markit said that its flash services purchasing managers' index remained unchanged at 51.3 in June for the second month, falling short of expectations for a rise to a reading of 51.9. Although it remained above the 50.0 mark that separates contraction from expansion, it was well below the long-run survey average of 55.6.
Meanwhile, an increase in the amount of goods flowing into the US in May likely reduced the extent to which trade will boost economic growth in the second quarter. A separate research showed that the deficit on trade with goods widened to $60.6 billion in May, compared to a $59.4 billion gap projected by analysts. Last month's reading follows a $57.5 billion trade shortfall in April, fresh numbers from the Department of Commerce reported. It turns out that exports were soft in May and imports rose. US exports inched down 0.5% to $119 billion. Imports increased 1.4% to $179.6 billion, the highest level so far this year. The rise in in-bound shipments largely reflected greater volumes of industrial supplies and consumer goods.
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.
All focus is on the US data
Once again all attention is paid to the US data. First of all, the US Personal Income, which is a measure of total income received by individuals, from all sources including wages and salaries, interest, dividends, rent, workers' compensation and transfer payments. This figure can provide insight on the US employment situation. At the same time, Personal Spending, which is a measure of purchases of goods and services by households and by non-profit institutions that serve households from private business. Next is the Core PCE Price Index, which is an average amount of money that consumers spend in a month. "Core" excludes seasonally volatile products, such as food and energy, in order to capture an accurate calculation of the expenditure. It is also a significant indicator of inflation. Finally, the US Pending Home Sales – a leading indicator of trends of the housing market in the US. It captures residential housing contract activity of existing single-family homes. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD.USD/JPY struggles to post more gains
The Greenback's bullish development against the Japanese Yen on Tuesday caused the broadening falling wedge pattern to be preserved. Even though the bearish momentum could prevail today, there is a number of supports located below the 102.00 major level, which are likely to prevent the Buck from sustaining sharper losses. One of those supports is a five-month trend-line, which should ideally be the lowest border to contain the volatility. Technical indicators also suggest the USD/JPY pair is to weaken today, but strong fundamentals could be sufficient to trigger a buying-spree, leading the exchange rate above the 103.00 psychological level.Daily chart
There are no sudden movements in the USD/JPY's performance, with the pair trading in tight range between the 50.0% Fibo and the down-trend. However, the exchange rate is approaching the resistance line now, which is likely to trigger a sell-off towards the mentioned Fibo level.
Hourly chart
Bulls retreated over the day, with 66% of traders holding long positions (previously 72%). The share of buy orders skyrocketed from 45 to 78%.
There is a small but nevertheless bullish bias among OANDA and Saxo Bank traders as well. In case of OANDA, 67% of positions opened by its clients are long. Similarly, 59% of positions opened by Saxo Bank traders are long as well, compared to 58% on Tuesday.
Spreads (avg, pip) / Trading volume / Volatility
Slightly more than a half expect the exchange rate to fall below 109.50 yen
Exactly half of the surveyed (50%) now assume that the US Dollar is to cost less than 109.50 yen after three month time. The most popular choice, however, implies that the Greenback is to cost between 111.00 and 112.50 yen in three months, selected by 18% of the voters. According to the votes collected between May 29 and June 29, the mean forecast for Sep 29 is 108.66. At the same time, 13% of the surveyed believe the Greenback could cost either between 106.50 and 108.00 or between 108.00 and 109.50 yen in three months.