- 52% of pending orders are set to buy
- 73% of traders are bulls
- 19% of traders see USD/JPY between 123.0-124.5 by end of June
- A potential dip to be limited by the 200-hour SMA at 119.80, while serious resistance is at 120.50
- Upcoming events: US CB Consumer Confidence, Chicago PMI, Tankan Manufacturing and Non-Manufacturing Index
Consumer spending in the US advanced less than expected in February 2015, indicating that economy may be losing momentum after several quarters of strong growth. Personal expenditures gained 0.1% last month; however, it has been a first rise in three months, which followed a downward change of 0.2% and 0.3% in January and December, respectively. The worse-than-estimated result can be explained by cold weather and snowy winter in Northeast and Midwest of the country, which emptied malls and car dealers. Consumer sentiment, which is directly connected to future spending decisions, may considerably change the direction the American economy is moving in. Services sector is accounting for the biggest share of US GDP, with more than 70% of it depending on domestic demand. Still, climbing payrolls and falling unemployment are likely to have a general positive impact on the economy in the medium-term.
Another important topic, especially for US monetary policymakers, is incomes' growth. Last month salaries jumped 0.4% on a monthly basis, more than 0.3% projected by analysts and up from a 0.3% rise in January. Wages is one of the key issues for the Federal Reserve, which is going to make future decisions on interest rates, based not only on consumer price developments, but also on labour market situation and wage tendencies.
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 consumer confidence to improve
Among the main economic events for today, the Conference Board may show improvement in consumer confidence in the afternoon, and Chicago PMI is expected to increase from 45.8 to 52.5 after a sharp drop in February. In the meantime, Japan also seems to be in a better shape, as Tankan manufacturing and services indexes are estimated to rise, from 12 and 16 to 14 and 17, respectively.
This week's main event is the US Non-Farm Payrolls to be published on Friday. According to the forecasts, there should be 251K more employed in March than in February, which is a substantial drop compared to the previous change of 295K.
Andrew Grantham, senior economist in CIBC World Markets, says that an increase in prices in the United States 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 improbable 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 [the Fed officials] could still be looking to hike in June."
USD/JPY: strong rebound from 119.00
As expected, a dense demand zone around 119.00 prevented extension of the losses and turned the recent downward trend around. As a result, USD/JPY is now attacking the weekly R1, and the upward momentum should continue to evolve. The main challenge for the bulls is anticipated at 122.00, which has already stopped advancement of the pair on two occasions: in December and in the first half of March.
Daily chart
USD/JPY soared through the resistance trend-line but started to consolidate near 120.30, where the currency pair appears to have met the upper boundary of the bullish channel. Consequently, there might be a small downward correction, possibly down to the 200-hour SMA at 119.80. Meanwhile, another serious resistance is at 120.50, represented by the line connecting the Mar 10 and Mar 20 highs.
Hourly chart
SWFX traders more bullish, while SAXO and OANDA clients less
The latest rally of USD/JPY seems to have encouraged more bulls to enter the market. Now they constitute 73% of all traders. However, there might be a lack of demand going forward, being that only 52% of pending orders set nearby are buy ones (64% yesterday).
Sentiment among the SAXO Bank clients towards the US Dollar deteriorated, but nonetheless stays distinctly bullish: 67% of open positions are long (76% yesterday). The change in the distribution between the longs and shorts at OANDA was minimal. The share of the former fell only one percentage point to 61%.