- The share of purchase orders slid from 64 to 61%
- Traders' sentiment remains bearish at 71%
- The monthly S1 around 118.93 are the nearest resistance
- Immediate support is around 118.27, represented by the 20-day SMA
- 58% of the survey participants expect the US Dollar to cost less than 120.00 yen in three months
- Upcoming events today: US Markit Services PMI, US CB Consumer Confidence, US New Home Sales, US Crude Oil Inventories, FOMC Statement, Federal Funds Rate, Japanese Retail Sales
The Greenback experienced mixed performance on Monday, appreciating mostly against commodity currencies, while suffering losses against some safe-havens. The US Dollar was able to advance 1.22%, 0.68% and 0.53% versus the Loonie, the Aussie and the Kiwi, respectively, while remained relatively unchanged versus the British Pound, adding only 0.10%. A return of risk aversion cause the Buck to decline against such currencies as the Euro, the Yen and the Swissie, with USD/CHF edging 0.32% lower, USD/JPY falling 0.40% and EUR/USD edging 0.48% higher.
Japan logged a trade deficit for a fifth consecutive year in 2015, after the country slipped into deficits following the 2011 nuclear accident in Fukushima, which led to closures of reactors and pushed up imports of oil and gas.Yet, the trade gap shrank 78% over 2014, falling to the lowest level in four years, according to the Finance Ministry, as lower oil prices pushed down import costs, while a weaker Yen spurred exports. Imports plunged 8.7% in 2015 from a year earlier, while exports rose 3.5%. Last year, the world's third biggest economy's trade shortfall was 2.8 trillion yen, compared with a massive 12.8 trillion yen in 2014. Furthermore, Japan's merchandise trade balance swung into surplus in December, as oil prices plunged, while the Japanese Yen rose versus other currencies. The December trade surplus came in at 140.2 billion yen, compared with a deficit of 379.7 billion yen in the preceding month and a deficit of 665.6 billion yen in December 2014.
However, Japan's exports have been falling amid a slowdown in China's economy. After surging an annual 7.9% in January-June period, exports climbed a modest 0.6% in July-December. Exports to China dropped 1.1% in 2015, whereas exports to the US surged 11.5%, making the US the top destination for Japan-made goods. At the same time, Japan's imports of crude oil, gas and other fuels plummeted 34% in 2015.
Vatsal Srivastava, director at the Blackwater Consulting, explains why the US Dollar is a advancing against the Yen this week. Even though he says that there was nothing fundamentally driving the USD/JPY on Monday, one of the key drivers is the falling oil prices, which is actually boosting the Yen, in his opinion, as there is an addition cause for more QQE. Vatsal Srivastava also mentions that "it is going to be a hard economic ride ahead and there seems to be no light on the horizon for Japan as of now". "Lets hope for the best," he added.
US CB Consumer Confidence
A small number of economic data releases are scheduled for Tuesday, such as the US Consumer Confidence. The Consumer Confidence is released by the Conference Board and captures the level of confidence that individuals have in economic activity. A high level of consumer confidence stimulates economic expansion while a low level drives to economic downturn. Furthermore, the Markit Services PMI could also impact the market prices. The Services Purchasing Managers Index (PMI) is released by Markit Economics and captures business conditions in the services sector. As the services sector dominates a large part of total GDP, the services PMI is an important indicator of the overall economic condition in US.USD/JPY: safe-haven demand rises
The US Dollar declined against the Japanese Yen on Monday, with price moving slightly outside the lower boundary, amid the return of risk aversion. The risk-off sentiment keeps prevailing today as well, pushing the USD/JPY lower, ignoring the immediate support in face of the 20-day SMA. The next level to limit the dips rests around 117.75, represented by the weekly PP and the monthly S2. However, at this rate the Buck might even close trade below the second support cluster, as technical indicators also contribute to the negative outlook, with no clear signs of a possible rebound.Daily chart
The Greenback failed to rebound from the lower border of the ascending channel, consequently piercing it to the downside. The risk-off sentiment pushed the USD/JPY lower, down to the 200-hour SMA circa 117.63, where the pair might find sufficient demand for a rebound.
Hourly chart
Bears dominate the market
Other market participants, such as OANDA and SAXO Group, have a completely different sentiment, as the majority of their traders still hold long positions. Among SAXO Bank, 60% of traders remain long the US Dollar, whereas 59% of all positions at OANDA are also long (previously 61%).
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 120 yen
The largest half of the survey participants (58%) expect the US Dollar to cost less than 120.00 yen in three months. The most popular choice is the 114.00-115.50 price interval, selected by 31% of the voters; however, according to the votes collected between Dec 26 and Jan 26, the mean forecast for Apr 26 is 118.76. At the same time, 13% of the surveyed believe the Greenback could fall in the 120.00-121.50 price interval after a three month period.