- Orders to buy the Buck are in a majority with 61% of the market
- Distribution between the long and short positions in the SWFX marketplace slightly surged to 59% and 41%, respectively
- 21% of traders see USD/JPY above 124.5 by mid-May
- Upcoming events: US PPI, US Building Permits, US Housing Starts, US FOMC Minutes, JPY Foreign Bond Investment, JPY Merchandise Trade Balance Total, JPY Leading Economic Index
US import prices posted the biggest decline in six years in January, adding to signs that domestic inflation could remain subdued for a while. The Labor Department reported that import prices plunged 2.8% last month, the largest drop since December 2008, after falling by a revised 1.9% in the preceding month. It was the seventh consecutive month of declines in import prices. In the 12 months through January prices fell 8.0%, the largest drop since September 2009. Import prices on goods aside from oil also declined, but at a much slower pace, partly reflecting a stronger Greenback and weak overseas growth. Excluding petroleum, import prices inched lower 0.7% from the prior month, the largest fall since March 2009, and were down 1.2% from the previous year. American exporters have been also facing new challenges amid weak growth overseas and a strengthening Dollar, which makes US-made products less competitive on the global market. Export prices fell 2% from a month earlier, the biggest fall since October 2011.
US consumer confidence unexpectedly declined in February from the highest level in 11 years despite strong job gains over the last months, signs of wage growth as well as lower gasoline prices. Consumer sentiment index dropped to 93.6 down from 98.1 in January, pointing to slower spending and uptick in gasoline prices in the beginning of the year.
Yasunari Ueno, Chief Market Economist at Mizuho Securities, said that "the preliminary gross domestic product release for the fourth quarter confirms the economy is past the worst, but it's not easy to be optimistic about the path of growth from here".Fundamental Background
Today we are expecting a lot of medium-important releases during the day, with FOMC Minutes being the only high-impact one, which will be published in the evening. Moreover, a lot of medium-impact data are expected on Japan just before the midnight, as well as early Thursday morning.
USD/JPY erases yesterday's gain
Glenn Levine, Senior Economist at Moody's Analytic, said that "Japan's corporate sector is enjoying record profit levels and sits atop a mountain of cash, with export-facing firms, in particular, benefiting from better export sales linked to the cheaper Yen, yet, so far firms have been reluctant to deploy any of this cash and invest in additional capacity".
The USD/JPY cross went through the 55-day SMA yesterday, only to reach the weekly PP resistance level. The pair gained 75 pips before it met resistance at 119.23 (just over the weekly PP). The Greenback is likely to keep declining until the US data is released later today, when the Buck might be pushed either way.
Daily chart
Looking at the hourly chart, the pair rebounded at first, improving the situation after yesterday's evening downward movement. However, resistance was met at the weekly PP, which forced the pair to fall and penetrate the 20-day SMA. Closest support now is represented by the 200-day and 100-day SMAs around 118.90.
Hourly chart
Sentiment remains bullish
The distribution between the long and short positions in the SWFX marketplace is changed by merely one percentage point, 59% and 41%, respectively. At the same time, there are more orders to buy the Buck, accounting for 61% of the market.
OANDA traders are as optimistic with respect to the Greenback, since 61% of open positions are long, although slightly less than yesterday (65%). In the meantime, the attitude of the SAXO Bank traders turned more to the negative side, being that 53% of open positions are short and the remaining 47% are long.
Spreads (avg, pip) / Trading volume / Volatility
21% of traders see USD/JPY above 124.5 by mid-May
Compared to the previous week the bullish sentiment gained some more ground, as 70% of all FX Community votes are now bullish. As US has had strong data releases, its economy has been growing; this pattern is likely to continue.
aslamhammad is waiting for an upward correction, noting that if the pair manages to stay above the 118.29 monthly PP, then price can still go higher. Whereas, rokasltu thinks the Buck is likely to fall, as the pair retreated from above 120 levels last week.