- Number of orders to acquire the US Dollar slightly dropped, from 67% to 65%
- Market sentiment remains unchanged, with the percentage of longs standing at 55%
- 16% of traders see USD/JPY between 123 and 124.5 by mid-June
- The nearest resistance is represented by the weekly R1 and upper Bollinger band at 121.61, while the closest support is still the monthly R1 at 121.07
- Upcoming events: US Core Retail Sales, US Unemployment Claims, US Import Prices, US Business Inventories
Treasury Secretary Jacob Lew compared the US economy with a "well-oiled machine", as the American economy managed to lead the world out of the Great Recession thanks to a bold fiscal and monetary response to the turmoil. Lew also gave positive assessment of the US economic health.
While some economists shared optimism about the world's number one economy following Friday's employment data, a number of ordinary Americans appeared to disagree. Gallup's US Economic Confidence Index came in at –3 for the week ended March 8, marking the third straight negative reading following an eight-week streak of positive figures. The index averages Americans' assessment of current economic conditions and their view as to whether the economic conditions are improving or deteriorating. On the index, the gauge can potentially reach its theoretical maximum of +100, if all Americans say the nation's economy is excellent or robust and getting better; or can fall to a theoretical minimum of -100, if all Americans say the economy is poor and getting worse. The negative reading came after last week's data showed the US unemployment rate dropped to 5.5%, reaching an almost seven-year low, while non-farm payrolls jumped 295,000, marking the 12th consecutive month of gains of above 200,000.
Andrew Wilkinson, Chief Market Analyst at Interactive Brokers, said that "the Japanese economy probably requires further stimulus from Bank of Japan", adding that the question "whether or not massive quantitative easing at the BoJ is actually working for the domestic economy" remains topical.US Core Retail Sales and Unemployment Claims anticipated to improve
By the end of the week no significant data on the Japanese economy will be released. However, today the US Core Retail Sales are expected to grow 0.3% after contracting a month earlier. At the same time, the Department of Labor will post data on the Unemployment Claims, which are likely to decrease to 305K from 320.
USD/JPY poised for more gains
According to Wilkinson, there are signs that "the market is getting back into that mode of expecting further stimulus." As a result, it is reasonable to "expect the Yen to continue weakening into 120s."
Yesterday, the USD/JPY pair edged higher once again after volatile trade between the monthly and weekly R1s. Neither of these levels allowed the US Dollar to pass; hence, the pair ended the day slightly over the upper Bollinger band at 121.43. Today the Greenback is expected to continue its upward momentum, as the US Core Retail Sales are likely to improve. The technical studies are bolstering this outcome, while the pair could encounter immediate resistance around the 2014 high at 121.84.
Daily chart
The Greenback has been steadily appreciating against the Yen for almost a week now. Even though a bearish correction is taking place since the beginning of the day, the support trendline at 121.24 is likely to turn the tide, as important US data releases are awaited.
Hourly chart
No changes in the bullish sentiment
For the third day market sentiment remains unchanged, with the percentage of longs standing at 55%. However, the number of orders to acquire the US Dollar slightly dropped, from 67% to 65%.
Market sentiment among the OANDA's traders remains unchanged, as 59% are still long. At the same time, SAXO Bank's liquidity consumers are pessimistic with respect to the US Dollar, since 61% of all positions are short and the remaining 39% are long.
Spreads (avg, pip) / Trading volume / Volatility
16% of traders see USD/JPY between 123 and 124.5 by mid-June
The sentiment among FX Community members changed significantly from the previous trading week, as now around 62% of traders suggest the Yen will continue to depreciate versus the Dollar.
Nuonrg, one of the survey participants, reckons that USD/JPY will maintain its bullish impetus, expecting the pair "to break the 120 level" and update the highs. Rokasltu, on the other hand, thinks that the Yen will advance versus the US Dollar. He defended his position by saying that "despite the strong US NFP data, the USD/JPY rate advance was not very substantial comparing to the previous USD/JPY rate increases after such surprising data." Consequently, "the potential for the upside is exhausted, and the pair might retreat during this week."