- The portion of buy orders inched up from 52 to 57%
- Nearly three quarters (74%) of all open positions are long
- Resistance is at 115.00
- Immediate support is around 113.40, namely the 20-day SMA and the weekly PP
- 52% of the survey participants expect the US Dollar to cost less than 117 yen in three months
- Upcoming events: US ADP Non-Farm Employment Change, US Crude Oil Inventories, US Beige Book
In spite of better-than-expected US Manufacturing figures, the Buck struggled to outperform other major currencies. The largest losses were registered against commodity currencies, such as the Loonie, the Kiwi and the Aussie; the Greenback dropped 0.96%, 0.59% and 0.46% against them, respectively. The Cable surged only 0.22% higher, while the USD/CHF dropped 0.10% lower. The only relevant rally was seen against the Japanese Yen, which weakened with the return of risk-on sentiment, allowing the Buck to appreciate 1.17% against it. At the same time, the EUR/USD remained relatively unchanged, sliding 0.04% lower.
US manufacturing activity continued to shrink in February for the fifth consecutive month, underscoring strong headwinds that the nation's assembly lines have recently faced. According to the Institute for Supply Management, the index of purchasing managers rose to 49.5 last month, compared with 48.2 in January. Even though, the figure represented the highest reading since September 2015, the gauge remained below the key 50-mark threshold, which indicates a contraction in manufacturing that accounts for 12% of the US economy. A strong Greenback, sluggish global demand and spending cuts by energy firms following a precipitous decline in crude oil prices had derailed the manufacturing sector. New orders sub-index stayed unchanged at 51.5 in February, while production sub-gauge climbed to 52.8, compared with January's 50.2. The employment sub-index also inched up to 48.5, compared with January's 45.9. At the same time, Markit's final PMI declined to 51.3 in February, down from 52.4 seen in January. Jobs growth slowed to a five-month low, while factory gate prices declined the most since June 2012.
A separate report showed construction firms boosted their spending by a robust 1.5% in January, to mark the biggest monthly increase since last May.
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 ADP Non-Farm Employment Change is the main driver today
From the US, however, the most important economic data release is the ADP Non-Farm Employment Change. The Employment Change is released by the Automatic Data Processing, Inc. The Employment Change measures the change in the number of employed people in the US. Generally speaking, a rise in this indicator has positive implications for consumer spending, stimulating economic growth. As there are no economic data releases from Japan scheduled for today, attention could also be paid to the US Beige Book. The Beige Book reports on the current US economic situation. Through interviews with key business contacts, economists, market experts, and other sources are gathered by each of the 12 Federal Reserve Districts. The survey gives a picture of the overall US economic growth.USD/JPY in limbo at 114.00 ahead of ADP data
The return of risk appetite and better-than-anticipated US manufacturing data caused the Greenback to erase all Monday's losses against the Yen yesterday. However, risks of edging lower again today persist, despite the USD/JPY currency pair being supported by the 20-day SMA and the weekly PP just below the opening price of 114.00. This cluster could fail to keep the pair afloat and trigger a sell-off all the way down back to the 112.00 major level. Meanwhile, technical indicators keep giving mixed signals, thus, a possibility of the Buck reaching 15.00 yen, where the monthly PP coincides with the weekly R1, exists.Daily chart
The USD/JPY currency pair appears to have entered an ascending channel on the hourly chart, but additional confirmation of the upper border is required to fully realise the pattern. As a result, a rally towards 114.88 is possible, namely the previous week's high, which also coincides with the pattern's resistance line at that point. From that point on, however, the Greenback is expected to begin falling towards 114.00/113.60 area.
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 65% of open positions are long, unchanged since Tuesday, 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 117 yen
The majority of the survey participants (52%) expect the US Dollar to cost less than 117.00 yen in three months. The most popular choice, however, is the 120.00-121.50 price intervals, selected by 18% of the voters. According to the votes collected between Feb 02 and March 02, the mean forecast for June 02 is 116.25. At the same time, 15% of the surveyed believe the Greenback could fall either in the 111.00-112.50 price interval or in the 114.00-115.50 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.
On the bullish side of the barricade, Trendmaster suggests that the "USD/JPY has been benefiting from risk aversion since the beginning of January. This week I am expecting the currency pair to trade within a range or slightly bullish," he mentioned.
Meanwhile, Daytrader21 believes that the Yen could post more gains against the US currency by the end of the week. "The USD/JPY will more likely to be trading below the 115.00 psychological number as the slide in equity market is not over yet, so current risk-off environment should push investor into the safe-haven currency like the Japanese Yen which gained substantially in current environment," he backed his view.