- The portion of sell orders dropped down to 74%
- Bullish traders' sentiment remains at 74%
- The nearest support is around 111.70, namely the monthly S3 and the weekly S1
- Major supply area is seen at 113.24 yen
- 56% of the survey participants expect the US Dollar to cost less than 120 yen in three months
- Upcoming events: US Markit Services PMI, US New Home Sales, US Crude Oil Inventories
With mixed US fundamental data results yesterday, the Buck experienced mixed performance over the day. The US currency, however, managed to outperform most major peers, with the largest gain registered against the Sterling, namely 0.92%. Meanwhile, the NZD/USD edged 0.84% lower, followed by a 0.35% fall in the AUD/USD pair. The Greenback also added 0.63% against its Canadian counterpart, but remained relatively unchanged against the Euro, inching only 0.09% higher. Losses of 0.84% and 0.73% were registered against the Swissie and the Yen, respectively.
Consumer confidence declined in February as households grew more worried about the outlook for the economy and jobs, sending their inflation outlook to the lowest level in nine years. The Conference Board's sentiment index dropped to 92.2 this month, hitting the weakest since July, down from a revised 97.8 in January. The gauge measuring current conditions slid to 112.1, compared with 116.6 in January. The share of people saying that jobs were plentiful slipped to 22.1% from 23%, while the proportion of Americans viewing business conditions as unfavourable climbed to 19.8% from 18.8%. The measure of consumer expectations for the next six months slumped to 78.9, the lowest level since February 2014, from 85.3 in a month earlier. Respondents' inflation expectations over the next 12 months fell to 4.7%, the lowest since February 2007, from 4.8%.
A separate report showed US home resales unexpectedly increased in January, hitting the highest level in six months, adding to signs that the world's number one economy remains on firmer footing despite slowing global growth and tightening financial market conditions. According to the National Association of Realtors, existing home sales climbed 0.4% to an annual rate of 5.47 million units, while January's figure was also the second highest since 2007. US home resales were up 11% from a year ago, the largest annual gain since July 2013.
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 Markit Services PMI and New Home Sales
With no significant economic data releases from Japan scheduled for today, all attention shifts to the US data, namely the US Markit Services PMI and the US New Home Sales. The Services Purchasing Managers Index (PMI) is released by Markit Economics, which 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. Meanwhile, the number of New Home Sales, released by the US Census Bureaum, is an important measure of housing market conditions. House buyers spend money on furnishing and financing their homes so, as a result, the demand for goods, services and the employees is stimulated.USD/JPY attempts to remain above the 112.00 mark
Although neither technical level was breached yesterday, the USD/JPY currency pair closed trade with a 79-pip loss. The immediate support cluster, namely the monthly S3 and the weekly S1, was put the test, but succeeded in keeping the Buck above 112.00 yen. The pair was unable to pierce this support through all of the month, but technical indicators suggest the exchange rate could drop below it today. In this case the next target will be the weekly S2 at 110.67, unless positive US fundamentals trigger a rally; the nearest resistance, however, is to remain intact.Daily chart
The USD/JPY did not exactly behave as we expected on the hourly chart, as it failed to rebound from the channel's lower border and put the upper one to the test. The pair appears to be in a short-term consolidation period around 112.00, which could last through all of the day, until the resistance line is reached tomorrow.
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 62% of open positions are long (previously 61%), and the Danish bank reports that 58% of its clients' positions are long, compared to 57% 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 (56%) 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 24 and Feb 24, the mean forecast for May 24 is 118.03. At the same time, 15% of the surveyed believe the Greenback could fall in the 111.00-112.50 price interval after a three month period.
This week, traders are expecting pure negative development of the pair, opening short position more often than long ones. Market sentiment is strongly bearish at 91%, while a drop down to 110.00 yen is expected.
Among those few who still believe the USD/JPY could edge higher by the end of this week, saso suggests that the pair has been falling on a risk off sentiment and that this situation might change in favour of the Buck.
In the larger part of 91% of traders who expect the US Dollar to weaken against the Japanese currency, Likerty stated that "I still consider another plunge of the pair" to back his view.