- The number of orders to purchase the US currency decreased from 72% to 68%
- 57% of all market participants are now long the Greenback (previously 56%)
- 17% of traders see USD/JPY between 123 and 124.5 by mid-June
- Nearest resistance is represented by the 2014 high around 121.84, while closest support is still the monthly R1 at 121.07
- Upcoming events: US Empire State Manufacturing Index, US Capacity Utilization Rate, US Industrial Production, US NAHB Housing Market Index
US producer prices continued to decline in February, adding to signs of weak inflationary pressures in the world's number one economy. The producer-price index for final demand, which measures prices that businesses charge for their goods and services, dropped a seasonally adjusted 0.5% in February from the preceding month, the Labor Department reported. Stripping out the volatile food and energy categories, the index slid 0.5%. Much of the fall in overall prices was due to a 1.5% decline in trade services, which measures changes in margins received by wholesalers and retailers. The index declined 0.6% in February from the same period last year, falling into negative territory after no growth in January. Excluding food and energy, the PPI climbed 1% in February from a year earlier, the lowest reading ever registered and markedly undershooting the 1.6% year-over-year print economists had been expecting. With intensifying disinflation threat, the Fed may opt to maintain interest rates lower for longer, as some of dovish members want to make sure the central bank also achieves the inflation side of its dual mandate.
Meanwhile, consumer confidence in the US dropped in March to the lowest level in four months, with the corresponding index slipping to 91.2, down from 95.4 in February.
Joseph Lake, Economist at the Economist Intelligence Unit (EIU) agrees that the Retail Sales data were a bit disappointing, but it was not entirely unexpected. Joseph also mentioned that they are expecting a bit of a pullback for which there are two main reasons: "First of all, looking at the retail numbers, the decline in sales was pretty broad-based, it wasn't concentrated in anyone's sector, and that suggests that part of the cause was the extreme weather in different parts of the country, which just prevented people from getting out to the stores buying cars or different goods and services that they normally would have in February." Lake says that the second reason is really important: "The retail sales were reported in nominal terms and the US has just recently entered, what we expect, a very short period of deflation," adding that "this means that prices are actually falling across the US, so when you report Retail Sales numbers in nominal terms and prices are falling, you would expect retails sales totals to fall, but if you look at the real figures in adjusted terms, they should be much better."Focus on US data releases
As there are no Japanese data releases on Monday, focus is on the US Empire State Manufacturing Index, US Capacity Utilization Rate, US Industrial Production and US NAHB Housing Market Index, as all four are to have medium impact on the Dollar and all are expected to improve.
USD/JPY retains bullish bias
On Friday, the US Dollar failed to erase Thursday's losses. The currency only slightly edged up during the last trading day of the week. Although USD/JPY tested the weekly R1 around 121.61, the worse-than-forecast PPI and Preliminary Consumer Sentiment data releases stopped the pair from surging higher. As for Monday, the Greenback is expected to increase in value relative to the Yen, as the technical studies suggest. However, the upside is likely to be limited by a cluster of resistances at 121.95.
Daily chart
Even though the US Dollar started rebounding at the end of last week, the currency began this Monday with a bearish move. However, the technical indicators in the short time-frames are giving bullish signals, meaning that USD/JPY is likely to rebound ahead of the data releases.
Hourly chart
Bullish sentiment keeps growing
Bulls prevail over bears, as 57% of all market participants are now long the Greenback (previously 56%). Meanwhile, the number of orders to purchase the US currency decreased from 72% to 68%.
OANDA traders maintain bullish sentiments towards USD, although they are not as confident as on Friday, as 56% of all positions are now long. At the same time, the distribution between the bulls and bears at SAXO Bank is close to the equilibrium, as 51% of all open positions are long.