- The share of buy orders skyrocketed from 23 to 68%
- 69% of traders are long 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
- 52% of the survey participants expect the US Dollar to cost less than 120 yen in three months
- Upcoming events: Philadelphia Fed Manufacturing Index, US Jobless Claims, US CB Leading Index, US Natural Gas Storage, US Crude Oil Inventories
Even though the FOMC Meeting Minutes were interpreted as rather dovish last night, the US Dollar managed to avoid losses against most major peers. The only significant gain was registered against the Swiss Franc, namely 0.38%, whereas the Buck remained relatively unchanged against the Euro, the Sterling and the Yen, adding 0.16%, 0.10% and 0.03%, respectively. At the same time, substantial losses were detected against commodity currencies, but they were caused by an increase in oil prices, rather than the FOMC Minutes. The Greenback slumped 1.38% against the Loonie, 1.02% versus the Aussie and 0.82% against the Kiwi.
Policy makers of the Federal Open Market Committee saw growing uncertainty over the outlook for inflation and growth, according to minutes of the January meeting, when the key lending rate was kept unchanged. US rate setters left the target range for federal funds rate on hold at 0.25% to 0.5%, after lifting it from near-zero in December. Many analysts are predicting further increases this year. While most of policy makers stuck to the expectation of 2% inflation over the medium-term, a number of members "viewed the outlook for inflation as somewhat more uncertain or saw the risks as being to the downside". However, the available data were not sufficient to assess the balance of risks to the economic outlook. Given the elevated risks, both external and domestic, some members wanted to see an evidence of inflation moving back to the 2% target before they were willing to consider further rate increases.
Meanwhile, US industrial production rose for the first time since July in January. America's industrial output increased 0.9% on month in January, up from a downwardly revised 0.7% decline in December. Capacity utilization, a measure of slack in the industrial sector, meanwhile, rose to 77.1% in the reported month, following the downwardly revised 76.4% in December.
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.
Philadelphia Fed Manufacturing index is the main USD driver today
Today all attention should be focused on the upcoming US data, such as the Philadelphia Fed Manufacturing Index and the US Jobless Claims. The Philly Fed Manufacturing Index is a spread index of manufacturing conditions (movements of manufacturing) within the Federal Reserve Bank of Philadelphia. This survey, served as an indicator of manufacturing sector trends, is interrelated with the ISM manufacturing Index (Institute for Supply Management) and the index of industrial production. It is also used as a forecast of The ISM Index. Secondly, the Initial Jobless Claims, which are released by the US Department of Labor, measure the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labor market. A larger than expected number indicates weakness in this market which influences the strength and direction of the US economy. According to the forecasts, the Fed Manufacturing Index is expected to improve, while the Jobless Claims to increase, thus, to worsen.USD/JPY struggles to stay above 114.00
The US currency remained unchanged against the Japanese Yen on Wednesday, as demand at 113.88 proved to be sufficient to keep the pair elevated. Technically, we might see a rebound, with the exchange rate touching the 115.00 level. The nearest resistance leaves enough room for a rally beyond 116.00; however, impetus to push the pair that high is absent. Nonetheless, the Buck lacks the strength to exit its current bearish trend, while daily and weekly technical studies keep giving bearish signals, suggesting the USD/JPY currency pair is to attempt and breach the immediate support area.Daily chart
The US Dollar struggled to appreciate on Wednesday, as the 200-hour SMA kept providing rather strong resistance. As a result, we should see the US currency weaken again today, unless the Fed Manufacturing Index boosts the Greenback sufficiently for this resistance to be broken.
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 60% of open positions are long (previously 57%), and the Danish bank reports that 58% of its clients' positions are long, compared to 56% previously.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 120 yen
The majority of the survey participants (52%) expect the US Dollar to cost less than 120.00 yen in three months. The most popular choice is the 120.00-121.50 price intervals, selected by 19% of the voters; however, according to the votes collected between Jan 18 and Feb 18, the mean forecast for May 18 is 118.75. At the same time, 13% of the surveyed believe the Greenback could fall in the 111.00-112.50 price interval after a three month period.
This week traders' expectations divided, as now 50% of Dukascopy Community members estimate the pair to gain in value.
According to Likerty, USD/JPY has already confirmed a correction of the recent USD weakness. "The pair could go as high as to 119.50/80 again. For this week – 114.30/70 is an important area," he mentioned.
Among the other 50%, Besim 76 said that the USD/JPY pair fell during the bulk of the week, but found enough support towards the end to turn things back around. "We actually went as low as the 111 area or so, but did get a bit of a bounce. Ultimately, we do think that the market continues to go lower though, probably trying to reach the 110 level," the trader added.