- The share of purchase orders edged up from 57 to 66%
- Almost three quarters (74%) of all open positions are currently long
- The 20-day SMA around 112.98 represents immediate support
- Resistance is the channel's resistance line at 113.40
- 56% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events: US Core PCE Price Index, US Goods Trade Balance, US Personal Spending and Income, US Pending Home Sales, Japanese Household Spending, Japanese Retail Sales
Due to a better-than-expected US GDP figures on Friday, the US Dollar managed to outperform all other major currencies, retaining its strength even over the weekend. The largest gains of 0.26% and 0.25% were detected against the Aussie and the Kiwi, respectively, followed by a 0.19% rally versus the Swiss Franc. The USD/CAD edged 0.017% higher, while the USD/JPY edged 0.16% to the upside. Meanwhile, the Cable lost 0.13%, whereas the EUR/USD also declined 0.07%.
New orders for long-lasting US manufactured goods dropped in February for the third time in four months, as the sector continued to struggle with the lingering effects of a strong US Dollar and lower oil prices. Bookings for goods meant to last at least three years plunged 2.8%, following the 4.2% gain, the Commerce Department reported. Categories reflecting business investment were broadly sluggish, indicating that American companies remain cautious about spending. New orders for nondefense capital goods excluding aircraft, a proxy for business spending on equipment, dropped 1.8% in February after a 3.1% increase in January.
Meanwhile, a separate report of the Labor Department showed the number of Americans applying for unemployment benefits climbed modestly last week, while revisions for prior weeks indicated the labour market was much stronger than previously estimated. Initial claims for state unemployment benefits increased 6,000 to a seasonally adjusted 265,000 for the week ended March 19. The prior week's claims were revised to show 6,000 fewer applications received than previously reported. The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, nudged up 250 to 259,750 last week.
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 PCE Price Index, US Core Personal Spending and Income, US Pending Home Sales
This Monday all attention is to be paid on US fundamental economic data. First of all, the Core Personal Consumption Expenditure, released by the US Bureau of Economic Analysis, is an average amount of money that consumers spend in a month. "Core" excludes seasonally volatile products such as food and energy in order to capture an accurate calculation of the expenditure. It is a significant indicator of inflation. Second, personal spending and income, both released by Bureau of Economic Analysis, Department of Commerce. The personal spending measures purchases of goods and services by households and by nonprofit institutions that serve households from private business. The personal income measures the total income received by individuals, from all sources including wages and salaries, interest, dividends, rent, workers' compensation, proprietors' earnings, and transfer payments. This figure can provide insight on the US employment situation. Finally, the Pending Home Sales, released by the National Association of Realtors, is a leading indicator of trends of the housing market in the US It captures residential housing contract activity of existing single-family homes. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD..USD/JPY on the verge of breaking the channel
The USD/JPY currency pair took another step closer towards the current bearish channel's resistance line, but with the bullish momentum limited, amid the 20-day SMA somewhat providing resistance. The pair extends the up-leg after piercing the 20-day SMA, but with supply, represented by the channel's upper border, stopping the rally. In case the pair manages to break out from the pattern, the next target to limit the gains would then be the weekly R1 at 113.85. Fundamental data, on the other hand, could still cause the pair to drop back under the 113.00, with the immediate support in face of the 20-day SMA failing to hold the losses.Daily chart
The USD/JPY currency pair failed to reach the channel's lower border on Friday and remained consolidated. Bulls kept pushing the Buck higher through the weekend, eventually reaching the resistance trend-line today. Furthermore, the nearly two-month down-trend was pierced, but the exchange rate could still move back below it if the pair bounces back from the channel's upper border too hard.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 61% of open positions are long, up from 64% on Friday. The sentiment as reported by SAXO Bank remains bullish, but not as strong as on Friday - 56% of currently open positions are long, down from 59% on Friday.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 114 yen
The majority (56%) now assumes that the US Dollar is to cost less than 114.00 yen after three month time. The most popular choice implies that the Greenback is either to cost somewhere between 106.50 and 108.00 yen in three months, selected by 20% of the voters. According to the votes collected between Feb 28 and March 28, the mean forecast for June 28 is 113.15. At the same time, 12% of the surveyed believe the Greenback could cost more than 120.00 yen after a three month period.