- 64% are to purchase and 36% are to sell the Greenback
- 70% of open positions are long
- 19% of traders see USD/JPY between 123.0-124.5 by end of June
- USD/JPY is moving towards resistance at 119.90 (200-hour SMA), while being well-supported at 119.00
- Upcoming events: US Personal Spending (Feb), Pending Home Sales (Feb), FOMC Member Fischer Speech
American economy rose slightly less when compared with analysts' expectations in the last quarter of the previous year, mostly led by upbeat consumer spending which was the highest in eight years. GDP added 2.2% on the annual basis, according to the final reading published on Friday. Economists called for a 2.4% average gain after the preliminary data also showed a 2.2% increase. However, experts suggest the economy could grow better, but several negative factors weighed on exports and consumer spending during October-December period. Among them, US Dollar has been in a constant up-trend since the middle of last year, thus making American exports less attractive over the time, while imports has seen an opportunity to increase. As a result, trade balance of the country widened in Q4; however, it was partly offset by smaller energy imports as US oil production has been growing. In the meantime, consumer confidence declined marginally amid temporary worse than forecasted weather conditions this winter.
Nevertheless, analysts assume the US economy should regain momentum in the coming quarters. Jobs' growth remains strong and fewer Americans are applying for jobless benefits. Therefore, despite some weakness in foreign trade, economic expansion will most probably be driven both by domestic demand and climbing investment in 2015.
Jasper Lawler, CMC Market Analyst, expects Japan's economy to start losing momentum. Jasper commented that despite the level of stimulus the Japanese economy had, a decline is right around the corner. He said that "even though we have seen some pick up in the quarters passed, now there is some indication that actually the growth in manufacturing is not as strong as it should be, but is actually looking as if it is moving towards a decline."US personal spending to increase
At 12:30 GMT we will see whether the US consumers indeed spent more in February. The previous two readings showed a decrease in their expenditures. Meanwhile, growth in the pending home sales is expected to decrease from 1.7 to 0.5%. There are no events scheduled today for the Japanese economy, but tomorrow the positive change in the average cash earnings should drop from 1.3 to 0.7%, according to the consensus.
Andrew Grantham, senior economist in CIBC World Markets, 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 to enjoy strong demand at 119.00
A recent test of resistance at 122.00 triggered a powerful bearish reaction, but now there is a good chance the bulls will soon regain control of the pair. At the moment USD/JPY is trading near a cluster of supports at 119.00, consisting of the monthly pivot point and 55- and 100-day SMAs. This should be enough to negate the downward pressure and send the exchange rate back to the 2014 high, violation of which will mean an up-move to the 2007 high at 124.00.
Daily chart
On the hourly chart USD/JPY has just broken last week's down-trend to the upside, meaning the rally is likely to develop further. However, there is a serious obstacle at 119.90 the pair must overcome first. It is represented by the 200-hour moving average, but a success here will open a path towards 122.00.
Hourly chart
Sentiment generally improves
As the US Dollar becomes cheaper, the sentiment towards USD/JPY improves. Right now 70% of open positions are long and only 30% are short. As for the pending orders, 64% are to purchase and 36% are to sell the Greenback against the Yen.
More and more SAXO Bank traders open longs. The portion of bullish market participants has already reached impressive 76%. At the same time, the distribution between the bulls and bears at OANDA is unchanged: 62 and 38%, respectively.