- Buy commands now take up 58% of the market
- 67% of all positions are now long
- 17% of traders expect the US Dollar to cost between 123.00 and 124.50 yen in three months
- Nearest resistance rests around 120.41, represented by the Bollinger band, while closest support lies at 119.91, the 55-day SMA
- Upcoming events: US Trade Balance, US Markit PMI Compsoite, US Marking Services PMI, US ISM Non-Manufacturing PMI
Orders for US factory goods recorded the biggest rise in eight months in March, amid increased demand for transportation equipment. Yet, the underlying trend remained weak due to a strong Dollar. According to the Commerce Department, new orders for manufactured goods increased 2.1% following seven monthly drops, buoyed by a 13.5% advance in orders for transportation equipment. Orders in a key category that tracks business investment plans ticked up a 0.1%. It was the first advance in this category since last August. Manufacturing, which makes up around 12% of the US economy, has been derailed by the strong Greenback and plunging crude oil prices, which have been putting a squeeze on the profits of multinational corporations and oil companies. The Dollar has gained 12% versus the currencies of the nation's main trading partners since June amid expectations of monetary policy normalization and economists predict it could slash 0.6 percentage point off growth this year.
The factory data added to reports on auto sales, housing and employment in suggesting the US economy was regaining some momentum, but probably not fast enough to persuade the Fed to begin raising interest rates next month, as most analysts had estimated at the start of the year.
Stephen Pope, a managing partner, gives his opinion about the current situation concerning the Bank of Japan. He says that if you want to find any shock revelations about what the BoJ are up to, one actually has to start digging quite deeply into the data. Stephen comments that the data a lot of data mining is required, because at the current time it is uncertain whether the Abenomics, the Three Arrows, are really working. He also adds that "there has been a lot of pressure from the Government on the BoJ to be a heavy intervention machine, so almost sacrificing their independence in order of making Abenomics work and pushing Japan forward."
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 ISM Non-Manufacturing PMI
There is still a Bank Holiday in Japan today, thus the most important event is the US ISM Non-Manufacturing PMI. The index is expected to slightly worsen, thus putting pressure on the US Dollar. However, there is also the US Trade Balance, which is also likely to show weak data and, as a result, the soft US fundamentals should weigh on the Greenback against the Yen as well.
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 to fall under 120 once again
After minor volatility, the USD/JPY currency pair failed to meet expectations, as it edged slightly down, rather than up. The Greenback remained relatively unchanged against the Yen, as an only two-pip decline occurred. Furthermore, the US Dollar retains its positions above the 120 level; however, it is to be tested today. A plunge is expected, with the nearest support located only at 119.91, represented by the 55-day SMA. Nevertheless, if the US fundamentals disappoint even more, a dip towards a support cluster around 119.64 is possible.
Daily chart
A surge on Monday did not occur, and the correction turned into a consolidation. The pair keeps fluctuating between the 120 psychological level (which is providing solid support for now) and the 120.30 level. Nevertheless, the 120 support is expected to be breached today, while the 200-hour SMA starts closing in to the current market price, bolstering the possibility of a decline.
Hourly chart
Market sentiment remains bullish
The share of bulls increased by one percentage point, as 67% of all positions are now long. The portion of buy commands, on the other hand, lost one percentage point, as they now take up 58% of the market.
Market sentiment of OANDA's traders strengthened, as today 58% of all positions are long (previously 57%). Meanwhile, SAXO Group traders' outlook towards the Greenback remained unchanged, with 72% of all positions being long
Spreads (avg, pip) / Trading volume / Volatility
17% of traders expect the US Dollar to cost between 123.00 and 124.50 yen in three months
The mean forecast for August 5 is 121.13. The vast majority of the survey participants (63%) still expect the Greenback to cost more than 120 yen. The most popular choice was 123.00-124.50 price interval, selected by 17% of traders. The second popular price range, 121.50-123.00, was selected by 14% of the surveyed.