- The buy orders account for 61% of all commands around the spot
- The traders' sentiment remains bullish, as the long positions take up 59% of the market
- 22% of traders see USD/JPY above 124.5 by mid-May
- The nearest support is represented by the 55 and 20-day SMAs, while the closest resistance remains the weekly PP
- Upcoming events: US Consumer Price Index, US Durable Goods Orders, US Initial and Continuing Jobless Claims, US GDP Annualized
Sales of new US single-family homes declined less than expected in January, while supply increased to the highest level since 2010. The Commerce Department reported that sales slid 0.2% to a seasonally adjusted annual rate of 481,000 units. December's sales were revised up to 482,000 units, the highest level since June 2008, from 481,000 units. Analysts, however, had expected a pullback to 471,000 units. Compared to the same period last year, sales rose 5.3%. Activity in the housing sector has remained sluggish since hitting a speed bump in the second half of 2013 as limited home inventories and higher prices put off first-time buyers, against the backdrop of weak wage growth. It has hindered the overall economy, even though mortgage rates have dropped dramatically from their 2013 peaks. Recent data also showed a plunge in existing home sales in January and softer single-family housing starts and permits.
In the meantime, Fed Chair Janet Yellen wrapped up her two-day testimony to Congress. On Wednesday, Yellen said that the Fed could hike interest rates before inflation rises as long as the central bank sees price growth accelerating and the labour market continues to improve. Yellen said the Fed wanted to see inflation moving toward its annual 2% goal "over the medium term" before raising rates. Fed Chairwoman repeated forecasts that inflation will rise 1.7%-2% by the end of 2016.
Steve Lucas, technical analyst from 3C Analysis, said: "I am not sure where the Bank of Japan will be comfortable with USD/JPY. I think it is kind of neutral weakness or strength in the Yen for direct exporters and importers. When we spoke in July, USD/JPY was at 100, and it is now at 120, so we have had a 20% weakness in the Yen, so is another 20% possible or 15% possible? Would it happen in 12 months? Possibly, it could, why couldn't it?"Mixed performance among high-impact US data
A lot of high-impact US data are due today. The US CPI is expected to decline almost 1%, while the change in Durable Goods Orders should be positive at 1.7% following a 3.3% contraction in December. As for tomorrow, the US Annualized GDP growth is supposed to weaken.
USD/JPY holding steady
Steve Lucas mentions "the fact that numbers coming out of the US continue to be good, compared to everyone else in the world, so all the facts being in place I don't see any reason why the Dollar can't continue to go stronger, and I understand why the market is stalled here, there are some very-very key levels, so I do have a bit of caution in my Dollar call and I do want to see that 121 area broken."
On Wednesday the USD/JPY cross attempted to decline, but was unable to breach the 20-day SMA. As a result, the losses were not as severe, the pair lost only 11 pips before settling just under the weekly PP. Meanwhile, the technical indicators are giving mixed signals, although the majority of them is bullish. The Buck is likely to regain momentum, whereas any decline will be short-lived. The pair also might meet resistance, namely the weekly R1 at 119.50.
Daily chart
On the hourly chart has been plunging since the beginning of the day, passing through every possible support level, with the closest one now at 118.63, represented by the daily S1. However, technical indicators are mostly pointing north, suggesting that the pair will stabilise at the end of the day.
Hourly chart
Sentiment remains bullish
Since yesterday the market sentiment remains unchanged, as bulls still prevail over bears with 59% of the market. At the same time, the number of buy orders contracted eight percentage points, and now they account for 61% of all commands around the spot.
OANDA traders' confidence with respect to the Greenback edged up, since 66% of open positions are long. In the meantime, the attitude of the SAXO Bank traders remains unchanged since yesterday, as still 52% of open positions are short and the remaining 48% are long.
Spreads (avg, pip) / Trading volume / Volatility
22% of traders see USD/JPY above 124.5 by mid-May
Compared to the previous week, sentiment became completely equal on USD/JPY cross with both long and short expectations divided 50/50 between traders. The average forecast for the pair is currently around the 119 level.
Rokasltu this time is on the bullish side, as he said: "USD/JPY pair has been recently attacking 120 mark, taking it and retreating later. I think that such a scenario might be repeated this week again, thus rate at the end of the week might be lower than 120." Meanwhile, llolor is expecting strong data out of Japan and no signs of further QE. Therefore, he suggests bearish developments.