- Buy commands now take up 53% of the market
- Market sentiment maintains its bullish trend at 72% (previously 74%)
- 16% of traders expect the US Dollar to cost either 121.50-123.00 or 123.00-124.50 yen after a three-month period
- Nearest resistance rests around 119.20, represented by the weekly PP and the 100-day SMA, while closest support lies at 118.43, the Bollinger band
- Upcoming events: US Markit PMI Compsite, US Markit Services PMI, Japanese Retail Trade, Japanese Large Retailer's Sales, US Consumer Confidence
US durable goods, a bellwether of business spending, soared considerably more than expected in March. Orders for durable manufacturing goods surged 4% in March, the biggest increase since July 2014, compared with a 0.6% rise expected by economists and following an upwardly revised reading of minus 1.1%, the Commerce Department reported. The jump was driven by a big rise in demand for commercial aircraft, with orders for civilian aircrafts spiking 30.6% after a 2.2% drop in February. Orders for motor vehicles rose 5.4%, and the overall transportation category expanded 13.5%, the biggest gain in eight months. However, outside of the transportation category, orders were down for a sixth straight month. Excluding transportation, core orders to US factories for long-lasting manufactured goods fell 0.2%. Shipments of non-military capital goods, which will impact the first quarter GDP estimates, declined 0.4% in March after falling 0.1% in February. Economists believe that overall economic growth slowed to between 1% and 1.5% in the January-March quarter. Yet, a rebound to growth of around 3% for the rest of this year is expected.
Manufacturers are struggling with the effects of a dramatic increase in the value of the US Dollar, which undermines exports by making US-produced goods more expensive overseas. A stronger Dollar also makes imports cheaper and more competitive in the US.
Craig Erlam, Senior Market Analyst at OANDA, commenting on the prospects of the Fed raising interest rates this year, said that there is no real difference between the Fed raising rates either in June or in September. In his opinion September just seems more likely, because it gives the Fed more time to prepare for the hike. Craig also does not see the immediate necessity for a rate hike in September, but thinks that "there is just a number of policymakers who want to test the water with the first hike, see how the markets react, how economy holds up."
US Consumer Confidence
Today the US Markit Services PMI data is expected to show slightly improved figures; however, the insignificant change is likely to have minimum impact on the US Dollar. The Japanese Retail Sales, on the other hand, are expected to decrease, thus weighing on the Yen. Nevertheless, the most important event, the US Consumer Confidence, is due tomorrow. It is a high-impact event, and its figures should determine further weakness or strength of the US Dollar against the Yen and other major peers.
Marcel Thieliant, economist from Capital Economics, forecasts USD/JPY to be at 130.00 by the end of the second quarter. The analyst commented that he expects the BoJ to step up the pace of easing at the end of this month. "This is obviously not what other economists expect, if that happens, we will probably see a strong drop in the Yen against the Dollar and against other major currencies," he said.
USD/JPY aims to climb over 119
On Friday, the US Dollar slumped more than anticipated. The two closest supports could not stop the USD/JPY pair from declining. As a result, the Greenback crossed the 119 level and closed trade at 118.96. A slight correction is expected to take place on Monday. The nearest resistance now lies around 119.20, represented by the weekly PP and the 100-day SMA, although the pair is unlikely to climb up so high. The target correction level is 119.10, while technical studies still give off mixed signals.
Daily chart
After breaching the ascending channel to the downside, the USD/JPY currency pair attempted to advance several times. However, the efforts were in vain, as the pair dropped below 119 amid weak US fundamentals. A correction has begun, but it might not last after more data is published later today.
Hourly chart
Bulls still prevailing over bears
Market sentiment maintains its bullish trend at 72% (previously 74%), whereas the number of purchase orders is now in the majority. The buy commands now take up 53% of the market.
OANDA traders' sentiment improved, as 69% of all positions are long, compared to 62% previously. Meanwhile, SAXO Group traders have an even more bullish outlook towards the Buck, as 70% of traders are long the Greenback today.
Spreads (avg, pip) / Trading volume / Volatility
16% of traders expect the US Dollar to cost either 121.50-123.00 or 123.00-124.50 yen after a three-month period
The mean forecast for July 27 is 120.87. The majority of traders (59%) expect the Greenback to cost more than 120 yen in three months. The most popular choice was divided between 121.50-123.00 and 123.00-124.50 prices intervals, both selected by 16% of survey participants, while the second place was taken by 117.00-118.50, voted for by 13% of traders.