- The portion of sell orders plunged from 60 to 82%
- Nearly three quarters (74%) of all open positions are now long
- The nearest support is around 111.70, namely the monthly S3 and the weekly S1
- Major supply area is seen at 113.24 yen
- 55% of the survey participants expect the US Dollar to cost less than 120 yen in three months
- Upcoming events: US CB Consumer Confidence, US Existing Home Sales, FOMC Member Fischer Speech
The US currency experienced mixed performance on Monday, mainly caused by rising oil prices, as losses were seen only against commodity currencies. The US Dollar managed to advance 1.82% against the Sterling, but this was due to bulls giving away GBP positions, amid Brexit fears. Notable gains of 0.94% and 0.91% were registered against the Swiss Franc and the Euro, respectively, whereas the USD/JPY inched only 0.26% higher. At the same time, the Buck suffered a 1.09% loss versus the Aussie, 0.99% versus the Kiwi and 0.44% against the Loonie.
The US manufacturing activity unexpectedly slowed in February, with US factories reporting the worst business conditions for over three years. The flash manufacturing PMI dropped to 51.0 in the current month, down from 52.4 in January. Back in December, the reading dropped to the lowest level since October 2012. American manufacturers have been struggling with headwinds blowing from appreciation of the US Dollar, China's economy slowdown, as well as a volatile stock market. In addition to that, lower oil prices have hit hard manufacturers tied to the energy industry, undermining domestic production, lowering demand for steel, drilling equipment and other manufactured products used in the industry. As the manufacturing sector accounts for a large part of total GDP, the manufacturing PMI is an important indicator of business conditions and the overall economic health of the US.
Last week, the Labor Department's report showed that the US underlying inflation surged to the highest level in more than four years in January, led by increasing rents and medical costs, a sign that price pressures started to build that could allow the Fed to gradually hike interest rates this year. The consumer price index, excluding the volatile food and energy components, increased 0.3% last month. That was the biggest surge since August 2011 and followed a 0.2% rise 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.
US Consumer Confidence and US Existing Home Sales
At 15:00 PM GMT the US CB Consumer Confidence and the Existing Home Sales are due. 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. The figure is forecasted to worsen and, thus, to weigh on the US currency. Concerning the Existing Home Sales, they are released by the National Association of Realtors and provide an estimated value of housing market conditions. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD. Both the Consumer Confidence and the Existing Home Sales are forecasted to worsen today.USD/JPY retreats after BoJ Kuroda's remarks
Although the USD/JPY inched higher on Monday, the immediate resistance in face of the weekly pivot point limited the volatility, while the pair closed in front of 113.00. The same level keeps acting as the closest resistance today, but a bullish outcome, especially after BoJ governor's statement which boosted the Yen, is doubtful. The given pair now faces a support cluster around 111.70, represented by the monthly S3 and the weekly S1. Technical indicators also support the probability of the bearish scenario prevailing today.Daily chart
Upon rebounding from the channel's support on Friday, the USD/JPY made its way towards the pattern's upper boundary at 113.30. As was expected, the bearish momentum took over again, causing the exchange rate to drop to 112.00. Consequently, we should see the pair recover up to 112.75, unless bears pressure the Buck too much, causing a breach of the channel's support.
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 61% of open positions are long (previously 63%), and the Danish bank reports that 57% of its clients' positions are long, compared to 58% 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 (55%) 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 18% of the voters; however, according to the votes collected between Jan 23 and Feb 23, the mean forecast for May 23 is 118.18. At the same time, 14% of the surveyed believe the Greenback could fall in the 111.00-112.50 price interval after a three month period.