- The number of orders to acquire the Greenback decreased from 68 to 60%
- Today 62% of traders are long the US Dollar (previously 61%)
- Closest resistance is the weekly R1 at 120.12
- From below the price is supported by a strong cluster around 119.60, represented by the 55 and 20-day SMA and the monthly PP
- Almost two thirds see USD/JPY above 120 yen in three months
- Upcoming events today: US Building Permits and US Housing Starts
Meanwhile, a separate report showed US consumer sentiment unexpectedly declined in May. The Thomson Reuters/University of Michigan's flash May reading on the index came in at 88.6. It was down from the previous month's reading of 95.9 and missed expectations of a 96 reading. The drop in optimism about the economy was widespread among all age and income groups across the US. News that the world's number one economy faltered last quarter, coupled with uneven employment growth, shook households this month, fuelling concerns that spending will be slow to rebound. A strong Dollar and weak oil prices also are holding back manufacturing, further denting the possibility of a rapid bounce back in the rate of growth.
Sean Yokota, head of Asia Strategy at SEB, said that "if you look at Japan's public debt, which is about 243% of GDP, which is also one of the largest in the world." The economist comments that the BoJ needs to get the debt down before all the baby boomers retire, so they need to go through some fiscal consolidation, whether through tax hikes or through spending cuts. He also mentioned that such measures put Japan into recession, but he thinks that it also gave a bit of confidence to people; that this time when you increase the taxes, it does hit you short-term, but you can come out of the recession. Moreover, the Japanese economy is still doing relatively O.K. and the equity markets are still pretty high.
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 Building Permits
There will be no data today concerning the Japanese economy, but later on Tuesday, the US Building Permits are expected to grow 20k to 1.06M, according to the forecast. However, the Building Permit historical data shows that the Building Permits figures disappointed most of the times, which might be an issue today.
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," Thieliant said.
USD/JPY keeps moving towards May high
The Greenback managed to overcome the immediate resistance cluster and even to negate last Wednesday's losses. The US Dollar appears to be back on track, regaining bullish momentum steadily, as yesterday's rally was the highest in the past two weeks. However, the 120 level still gives some trouble, as the USD/JPY pair was yet again unable to stabilise above it. Nevertheless, we are likely to see the Buck breach the area today with gains limited around 120.10, while technical studies are bolstering the positive outcome.
Daily chart
This week has begun with the US Dollar gaining ground against the Japanese Yen. Moreover, the Greenback was able to erase most of last week's losses, being only 30 pips away from a weekly high. Once the USD/JPY stabilises above the 120 level, a surge towards the May high will become the next target.
Hourly chart
Bulls lose some numbers
Market sentiment improved again, as today 62% of traders are long the US Dollar (previously 61%). The number of orders to acquire the Greenback, on the other hand, decreased from 68 to 60%.
The market participants at other brokers appear to be more bullish on USD/JPY. Right now 61% of OANDA clients are holding long positions. SAXO Bank traders are even more optimistic towards the Greenback, being that 65% of their positions are long.
Spreads (avg, pip) / Trading volume / Volatility
Almost two thirds see USD/JPY above 120 yen in three months
The surveyed traders are mostly bullish on the Dollar. According to the latest data, 63% of them expect the US currency to cost more than 120 yen after three months. Nevertheless, the largest concentration of answers lies between 123.00 and 124.50, namely one fifth of them (20%). Meanwhile, the average of the three-month forecasts collected between Apr 19 and May 19 is 120.89.