- Sell orders take up 58% of the market
- Market sentiment remains bullish at 71%
- The nearest support is around 111.70, namely the monthly S3 and the weekly S1
- Major supply area is seen at 113.24 yen
- 59% of the survey participants expect the US Dollar to cost less than 120 yen in three months
- Upcoming events: US Durable and Core Durable Goods Orders, US Jobless Claims, US HPI, US Natural Gas Storage, Japanese National Core CPI, Tokyo Core CPI
The US Dollar experienced mixed performance on Wednesday, having declined against three out of seven other major currencies. The losses were triggered by disappointment in the US New Home Sales and the Markit Services PMI figures, causing the USD/CAD to fall 0.66% lower, the NZD/USD to edge 0.25% higher and the USD/CHF to inch 0.25% to the downside. Nonetheless, the Buck managed to remain in the green zone against the third commodity currency, namely the Aussie, adding 0.08%. The Greenback also remained relatively unchanged against the Euro and the Yen, gaining 0.06% and 0.07%, respectively. The only substantial rally of 0.69% was seen against the British Pound, which continue to suffer from the fear of a Brexit.
The Fed policy makers remain divided on future interest rate hikes. Jeffrey Lacker, Richmond Fed President, said that the US central bank still has room to lift rates further in the coming months, as there are no signs that recession is imminent. Even though inflation remains below the Fed's 2% target, inflation indicators suggest a possible move back toward the goal over the medium term, Lacker said. The official added that economic analysis indicates that inflation could average 1.9% in the period between 5 years to 10 years from now. Yet, Lacker is not a voting member this year. Moreover, the new head of Minneapolis Fed, Neel Kashkari, said that he is optimistic about the US economy, which continues to grow moderately as the year progresses, adding that he sees both upside and downside risks to the growth outlook. Meanwhile, Robert Kaplan, Dallas Fed President, said that he does not expect the US economy to enter recession this year. Kaplan is among Fed officials advocating a patient and cautious approach to policy normalization given the global headwinds.
At the same time, St. Louise Fed President, James Bullard, reiterated his opposition to further interest rate increases amid a decline in US inflation expectations, which threatens the Fed's credibility. Investors are now expecting a price measure of less than 1.5%.
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 Core Durable Goods Orders
Concerning the US side, several economic data releases are scheduled for today, but the most important one is the Core Durable Goods Orders. Talking about the US Core Durable Goods Orders, which are released by the US Census Bureau, they measure the cost of orders received by manufacturers for durable goods, which means goods planned to last for three years or more, excluding the transport sector. As those durable products often involve large investments they are sensitive to the US economic situation. The Core Durable Goods Orders are forecasted to sharply rebound and could provide a bullish reaction for the USD pairs. Even though no economic data releases are expected from Japan, the Tokyo Core CPI is due early morning, which is likely to set the mood for the Asian session on Friday.USD/JPY keeps struggling to remain above 112.00
Upon reaching the 111.00 yen, the US Dollar managed to regain the bullish momentum and close trade with a seven-pip rally yesterday. The support cluster circa 111.70, namely the monthly S3 and the weekly S1, once again proved to be strong, but could still give in today. Technical studies are now giving distinctly bearish signals in the daily timeframe, implying that the USD/JPY could fall back towards the 111.00 mark or lower—towards the weekly S2 at 110.67. In case bulls take over the market, we might see the nearest resistance in face of the weekly PP overcome.Daily chart
Yesterday the USD/JPY currency pair attempted to break out of the descending channel through the the lower border, while an unsuccessful attempt almost led to a full-scale breach of the upper one today. Nonetheless, the returned in its trading range between the channel's boundaries, awaiting for a possible impetus to push the pair out once more. Nonetheless, the impetus could be bearish and only cause a fall towards 111.00 level, retesting the support line, while the 200-hour SMA is to limit the gains if a breach to the upside occurs.
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 66% of open positions are long (previously 62%), and the Danish bank reports that 56% 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 (59%) 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 25 and Feb 25, the mean forecast for May 25 is 117.69. 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.
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.