© Dukascopy Bank SA
The Japanese yen was surprisingly calm, during the previous week. Volatility was elevated on this pair and it managed to trim some losses, however, still remained vulnerable to further downside movement. The pair was easing on Tuesday as it failed to use Monday's risk-on approach to its own benefit, therefore investors started selling again. Moreover, on Monday, the US manufacturing PMI for February declined to 51.0 from 52.4, while analysts had expected a marginal improvement to 52.5. This index confirmed the ongoing slowdown in the manufacturing sector. Volatility was lower on the pair on Wednesday, considering recent major movements, and it was oscillating around 111.80 level ahead of the US session, only marginally lower on the day. However, on Friday, a fresh US GDP and personal consumption data temporarily terminated the low volatility seen during the session, with the buck jumping around 40 pips to trade below $114 with moderate gains. The US GDP during the fourth quarter of 2015 was revised upward to 1%, up from the 0.7% initial estimate, but still lower than the 2% pace set during the third quarter. Growth during the quarter was impacted by a slowdown in net exports. For the full year, gross domestic product rose 2.4%, matching 2014's growth rate.
This week, traders are expecting pure negative development of the pair, opening short position more often than long ones. The pair is likely to be driven by fundamental data from the United States, and the fact the greenback is bought in 64% of all cases across the board, is bolstering the case the pair can drop below 114 level.
© Dukascopy Bank SA