USD/JPY edging closer to 119.00

Source: Dukascopy Bank SA
  • The share of purchase orders grew, from 62% to 69%
  • Bullish market sentiment strengthened, as 65% (previously 63%) of traders are now long the Buck
  • 19% of traders see USD/JPY between 123-124.5 by end of June
  • Nearest significant resistance is represented by the weekly PP at 120.27, while closest support is the cluster around 119.05
  • Upcoming events: US Unemployment Claims, US FOMC Member Lockhart Speech, Japanese Household Spending, Tokyo Core CPI and Japanese Retail Sales

© Dukascopy Bank SA
The US Dollar experienced mixed performance yesterday: losses, as well as gains, were registered against major currencies. The Greenback appreciated 0.63% versus the Kiwi and 0.43% versus the Aussie. Nevertheless, the largest slump of 0.42% was detected against the Euro.

Orders for durable goods in the United States have surprisingly slipped in February of the current year, even though the majority of analysts predicted this statistical indicator to increase slightly by 0.2% on month-to-month basis. A decline reached 1.4% last month and followed a downward-revised 2% gain in the preceding month. Moreover, orders for non-military capital goods that exclude transportation items diminished as much as 0.4%, after a zero growth in January, which initially used to be positive at 0.3% but was also revised to the negative side. For the core indicator it was the sixth consecutive month with worse-than-estimated data released, while in five out of six times core orders were falling down on a monthly basis.

Experts are discussing some potential factors that could negatively weigh on orders for goods with a period of use of more than three years. Among them, slowdown in global economy is providing American producers with negative impetus, and US growth alone is not enough to carry weakness abroad. Apart from that, economists see unfavourable impact from stronger US Dollar. As a result, American-made goods are becoming less attractive outside the US, and foreigners are switching to buying products from elsewhere, rather than the United States.

Andrew Grantham, senior economist in CIBC World Markets, mentioned that they are expecting the Fed to rise interest rate in June. He backs up this conclusion by mentioning that "what we saw from the Fed statement – they said that they expected inflation to stay close to recent low levels." Andrew added that "as long as inflation does not decelerate," the Fed "could still be looking to hike rates as early as June."

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US Unemployment Claims



Today the highest-impact data release on the US economy is the Unemployment Claims. Even though the Department of Labor is expected to report no change, an increase in claims is quite likely. Moreover, at the end of the day a number of the Japanese data are expected to improve; hence, the US Dollar may well experience pressure.


Grantham also gave his forecast on whether inflation in the US will pick up any time soon. He said that an increase in prices is unlikely to accelerate, at least on the core level and probably even on the headline level, "given that we have seen some further decline in oil prices since the end of February." According to him, it is not likely that year-view rates of inflation are going to get any stronger in the near-term (next 2-3 months). Still, "in terms of Fed policy, as long as they [headline and core inflation] do not decelerate significantly, they could still be looking to hike in June."



USD/JPY edging closer to 119.00

Even though USD/JPY fell, the decline was not significant, and the pair's attempts to reach the support cluster at 119.00 turned out unsuccessful. However, the US Dollar still dropped 26 pips and settled at 119.47. The technical studies retain their mixed signals, although the Greenback will probably weaken after the Unemployment Claims data release later today (unless the figures decrease). As a result, the 119.00 floor might be breached, although the Dollar is likely to close around this level.


Daily chart
© Dukascopy Bank SA

USD/JPY has been in a down-sliding channel since last Friday, and the pair attempted to pierce the resistance trend-line on several occasions. So far all efforts were in vain; however, the support line was breached recently, as traders anticipate the US Unemployment Claims data. Currently the pair is trading under the level of 119, but a rebound is likely to take place, even though an overall negative bias is to persist.

Hourly chart
© Dukascopy Bank SA

Even more bullish traders

Bullish market sentiment strengthened, as 65% (previously 63%) of traders are now long the Buck. The share of purchase orders grew as well, from 62% to 69%.

The percentage of OANDA's bulls slightly tripped, as 61% of all positions are now long. Meanwhile, SAXO Group traders are more confident in the ability of the US Dollar to appreciate: 72% of traders are long the currency.















Spreads (avg, pip) / Trading volume / Volatility

19% of traders see USD/JPY in 123-124.5 interval by end-June

© Dukascopy Bank SA
The mean forecast for June 25 is 122.53. However, only 23% of traders expect the Greenback to cost more than 126 yen in three months. Meanwhile, 19% of traders expect the USD/JPY to fall under the 123-124.5 price range by the end of June. The second most popular interval was 121.5-123.0, chosen by 14% of survey participants.


Concerning the present week, the sentiment experienced substantial changes, as a vast majority of votes now are positive, namely 57.1% of them. The average prediction for Friday of this week is located around the 119.8 major level, but more than 22% of all votes are placed in the range between the 120.3 and 121.3 levels.

One of the community members, Likerty, has a bullish outlook towards USD/JPY. He said the story is different with the Dollar/Yen, than with other majors. However, the traders does not expect the Greenback to go over the 121.40 level. Megajorko, another survey participant, retains a bearish outlook towards the currency pair. The community member mentioned that there is a high possibility that the Yen will start gaining power and that he still prefers to be short the Buck for the time being.
© Dukascopy Bank SA

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