- The portion of purchase orders doubled from 33 to 66%
- Bulls keep dominating the market with their high percentage (74%)
- Resistance is around 113.40
- Immediate support is around 112.39, namely the weekly S1
- 53% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events: US Jobless Claims, US Natural Gas Storage, US Federal Budget Balance, Japanese BSI Manufacturing Index,
The US Dollar's performance on Wednesday was quite similar to the Sterling's. Losses were also registered against the Aussie and the Loonie, namely 0.63% and 1.20%, respectively. Meanwhile, the Greenback surged 1.36% against the weakened from the RBNZ's rate cut Kiwi, while also adding 0.65% against the Yen, which suffered from risk-on sentiment yesterday. At the same time, the Buck remained relatively unchanged against the Swiss Franc and the Euro, gaining 0.16% and 0.10%, respectively, whereas the Cable remained completely flat.
Japan's economy slowed less than initially thought in the last quarter of 2015, though the country remains on the brick of falling into another recession despite Prime Minister Shinzo Abe's attempts to underpin growth. Revised data for gross domestic product showed the world's third biggest economy shrank at an annualized pace of 1.1% in the December quarter from the previous three-month period, compared with the initial estimate of a 1.4% contraction. Private consumption was the main drag on Japan's economy in the reported period, dropping a revised 3.4% on an annualized basis, from an originally estimated 3.3%. However, growth in business investment was revised up to an annualized gain of 6.3%, compared with the 5.7% increase initially reported. For the whole of 2015, the Japanese economy came to a revised 0.5% from an initially estimated 0.4%.
The moribund economic backdrop will keep the Bank of Japan under pressure to further expand monetary stimulus. However, policy makers may refrain from bold measures when they meet next week for a rate review, after introducing negative interest rates in January. Moreover, weak growth could boost market speculation that Abe may postpone a second consumption tax hike to 8% from 8% scheduled in April next year.
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 Jobless Claims and the Federal Budget Balance
There are only two relevant economic data releases to have an impact on the USD/JPY today. First of all, the UK Jobless Claims, which are released by the US Department of Labor and are a measure of 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. However, the Jobless Claims tend to have a mild impact on the USD pairs. The second event to focus on is the The Monthly Budget Statement. It is released by the Financial Management Service and summarizes the financial activities of federal entities, disbursing officers, and Federal Reserve banks. A positive budget statement that receipts exceed budgetary outlays is seen as bullish for the USD. Early morning on Friday the Japanese BSI Manufacturing Index is due, which should send the USD/JPY lower if the data manages to improve, as the forecast suggests.USD/JPY rises on risk appetite
The Greenback overperformed on Wednesday, as somewhat faded risk aversion pushed the USD/JPY higher. The pair almost completely erased its Tuesday's losses, but with the 20-day SMA and the weekly PP providing sufficient resistance to keep the Buck from edging higher. This area remains the immediate resistance cluster today as well, but if bulls manage to advance the US Dollar higher, gains are likely to be capped by the 114.00 major level, rather than the nearest resistance area. Technical studies are now bolstering the possibility of the positive outcome by giving bullish signals in the daily timeframe, compared to bearish ones yesterday.Daily chart
The resistance line on the hourly chart failed to keep the USD/JPY currency pair from advancing yesterday, but the 200-hour SMA succeeded. However, with weaker demand for safe haven assets, this level was also pierced earlier today. The pair could extend its rally, but the psychological level on the daily chart suggests otherwise.
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, compared to 61% on Wednesday, and the Danish bank reports that 57% of its clients' positions are long, compared to 61% previously.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to rise above 114 yen
The majority of the survey participants (53%) expect the US Dollar to cost more than 114.00 yen in three months. The most popular choice implies that the Greenback is to rise above 120.00 yen in three months, selected by 18% of the voters. According to the votes collected between Feb 10 and March 10, the mean forecast for June 10 is 114.46. 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's overall sentiment for the USD/JPY pair again is bullish, as 70.6% of all traders are supporting the positive case for the pair, while more than 22% of traders expect the pair to close above the 113.8 level towards the end of present working week.
Among the traders with a positive outlook towards the USD/JPY currency pair, Besim76 believes that traders moved away from safe havens, amid poor fundamental data from Japan. As a result, the US Dollar could end the week higher against the Yen again.
At the same time, megajorko has a negative perspective. He said that "the yen has performed weaker than all major currencies, but there were very strong bulls in the yen, so I suppose the bearish power to continue after this week's correction."