- 60% of orders are set to purchase the Buck
- Three fourths of all open positions are long
- 70% say US Dollar is going to cost more than 120 yen in three months
- The short-term ceiling is at 120.00, while losses could be limited by the 200-hour SMA at 119.70
- Upcoming events: USD ADP NFP, ISM Manufacturing PMI, FOMC Williams and Lockhart Speeches, Crude Oil Inventories
Jeffrey Lacker, the President of the Federal Reserve Bank of Richmond, speaking at the Greater Richmond Chamber of Commerce's Spring Regional Forum on Tuesday, said that he expects the Fed to raise interest rates as soon as June of this year. He admitted that the strong case of June's hike should be broadly supported by solid economic growth and rising inflation. The latter indicator has been temporarily weakened by a sharp decline in oil prices; therefore, there is likely to be no significant long-term effect from that. Mr. Lacker has also added that lifting rates in the short-term is only possible, if future economic data shows no considerable divergence from expectations. Richmond Fed's head, who has a right to vote at FOMC meeting in 2015, is one of the most hawkish members of the Federal Open Market Committee, as he was calling for a June rate increase since the beginning of this year.
Consumer confidence in the US rose more than expected in March. The index, calculated by the Conference Board, advanced to 97 points this month, up from 96.4 in February. Economists, from their side, estimated a jump up to 96.6 points. The survey is based on responses from about 5,000 households across the country; therefore, this indicator in considered to be one of the leading for future consumer spending, which accounts for a majority of the US economic activity.
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."
David Starkey, Senior Market Analyst from Cambridge Mercantile Group, commenting on the Fed removing 'patience' from Fed's interest rate guidance, said that "Yellen lowered expectation for GDP, inflation, and as such – the trajectory of Fed rates." He noted that "in December the last economic projections were that the Fed rates would be over 1% at the end of 2015." However, the most recent data showed the Fed now only expects rates to go as high as 0.625% by the end of 2015.
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."
US economy to add more jobs than in February; manufacturing PMI to decline
While the US economy may add more jobs in March than in February, the data on the manufacturing sector is not reassuring. The purchasing managers' index is expected to fall from 52.9 to 52.5.
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.
USD/JPY halts at 120
As it turned out, demand at 119 was insufficient to send the price through 120 in an instant. The bears here continue to resist development of a rally, but should eventually give in. The next objective will then be the 2014 high near 122. However, we still cannot rule out a dip beneath the 100-day SMA. While this will not necessarily mean a major reversal, it will imply a sell-off to 117, namely the 23.6% Fibonacci retracement of the Jul-Dec up-move.
Daily chart
The pair fell through the lower boundary of the bullish channel before reaching an important down-trend at 120.40. The short-term ceiling is therefore at 120.00, while losses could be limited by the 200-hour SMA at 119.70, though it did not seem to help earlier this day. A breach of the moving average will likely imply a slide down to 119.00.
Hourly chart
SWFX and OANDA traders are bullish; SAXO clients turn undecided
The market appears to be strongly convinced the US Dollar is going to appreciate relative to the Yen. Three fourths of all open positions are long. As for the pending orders, 60% of them are set to purchase the Buck and thus to increase the share of longs even further.
There was a substantial change in the attitude of SAXO Bank traders towards USD/JPY. While yesterday around two thirds were long the pair, today the percentage of bulls is below 50%, namely at 46%. Meanwhile, the distribution between the longs and shorts at OANDA is the same as 24 hours ago: 61% of all open positions are longs.
Spreads (avg, pip) / Trading volume / Volatility
70% say US Dollar is going to cost more than 120 yen
There are more bulls among the FX Community members, but the advantage is slim: 53.8% of them are bullish and 46.2% are bearish. Nearly 24% of the surveyed expect USD/JPY to finish this weekly between 119.7 and 118.8, while the intervals 120.5-119.7 and 118.8-117.9 were both picked by 19% of the respondents.
Panzer, commenting on the prospects for the pair, said "there is a real possibility to test strong resistance at 122.10 level," whereas for geula4x USD/JPY "seems bearish on the daily chart." He noted that resistance lies around 121.62, represented by the previous daily highs, and support lies at 118.25, which has held price since February 9.
As for the longer-term perspectives, the consensus forecast for the first of July is 122.16. The conviction of traders in bullishness of the US Dollar is also shown by the fact that 70% of them placed their forecasts above 120 yen, and the most popular price range was 124.50-123.00, chosen by 17% of the survey participants.