- The share of buy orders slid from 59 to 51%
- 64% of traders have a positive outlook towards the Buck
- The nearest resistance around 117.15, namely the weekly R1; the 20-day SMA and the monthly S1
- Major demand area is seen at 113.89 yen
- 53% of the survey participants expect the US Dollar to cost less than 120 yen in three months
- Upcoming events: US Empire State manufacturing Index, US NAHB Housing Market Index, Japanese Core Machinery Orders, FOMC Member Rosengren Speech
The Greenback started the week by outperforming most of other major currencies, despite there being a bank holiday in the US yesterday. As risk-on sentiment returned, the USD/JPY climbed 1.19% higher, also being the best USD cross performer. Other significant gains were registered against the Swissie (1.02%), the Euro (0.90%) and the Sterling (0.49%). Even though commodity currencies were stronger with the rebound of oil prices on Monday, the Loonie managed to add only 0.12% against the US Dollar, while the NZD/USD edged only 0.29% higher. The Aussie, on the other hand, posted a solid 0.44% rally against its US counterpart.
Japan's economy shrank in the final quarter of 2015 despite of more than three years of Abenomics programme aimed at rejuvenating the world's third biggest economy. Japan's economy contracted an annualized 1.4% in the three months through December as consumers refrained from spending, while exports to emerging markets failed to gather enough momentum to make up for weak domestic demand. The decline in gross domestic product appeared to be bigger than economists' median forecast for a 1.2% drop and followed a revised 1.3% rise in the preceding quarter, according to Cabinet Office. Private consumption, which accounts for 60% of GDP, declined 0.8%, a sign Abe's stimulus programme have so far failed to encourage households to spend. While domestic demand subtracted 0.5 percentage point from GDP growth, external demand, or net exports, added 0.1 point amid a decline in the value of imports triggered by plunging oil prices.
Last month the Bank of Japan stunned markets by introducing a negative benchmark interest rate, in an attempt to stimulate the economy as volatile financial markets threatened its efforts to overcome deflation. Analysts expect the central bank to take additional easing at its next meeting in March, as the downside risks to the BoJ's outlook for growth and inflation are increasing.
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 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 Empire State Manufacturing and the NAHB Housing Market Indexes
Today attention should be paid to the US Empire State Manufacturing Survey. It is conducted by the Federal Reserve Bank of New York gauges business conditions for New York manufacturers. It is a leading indicator of economic health, a strong reading of which could bring back confidence in global economic growth. Another important economic releases will be the NAHB Housing Market Index, which is released by the National Association of Home Builders. It presents home sales and expected home buildings in the future indicating housing market trend in the United States. The growth rate of the housing market affects the USD volatility.USD/JPY consolidates around 114.50
With demand for less riskier assets, namely the Yen, lower, the US Dollar was able to post significant gains against it on Monday. Daily and weekly technical studies keep insisting that the given pair is likely to resume its bearish momentum rather sooner than later. The monthly S2 and the weekly PP form the nearest support cluster just under 114.00, but if bears manage to push the USD/JPY lower, this level will doubtfully hold. At the same time, the closest area to stop USD-buying is located above the 117.00 major level, more than 200-pips away from the spot price.Daily chart
The exchange rate failed to return within the borders of the descending channel yesterday and extended its trade between the support and resistance lines of the newly-formed ascending channel. The pair also edged closer to the 200-hour SMA near the channel's upper border, and, technically, we should see the price bounce back towards 114.00, before seeing another bullish reaction.
Hourly chart
SWFX sentiment stays bullish
Traders at OANDA and Saxo Bank have a diametrically opposite view of the pair's future. Clients of both brokers are mostly bullish. Canadian-based foreign exchange company reports that 64% of open positions are long (previously 67%), and the Danish bank reports that 58% of its clients' positions are long, compared to 61% previously.
Spreads (avg, pip) / Trading volume / Volatility
Exactly a half expect the exchange rate to rise above 120 yen
The majority of the survey participants (53%) expect the US Dollar to cost less than 120.00 yen in three months. The most popular choices are the 120.00-121.50 and the 111.00-112.50 price intervals, both selected by 15% of the voters; however, according to the votes collected between Jan 16 and Feb 16, the mean forecast for May 16 is 118.58. At the same time, 12% of the surveyed believe the Greenback could fall in the 121.50-113.00 price interval after a three month period.