- Pending orders are equally divided between the buy and the sell ones
- Today 71% of traders hold long positions
- The 20-day SMA and the weekly PP around 112.75 represents immediate support
- Resistance is the weekly R1 at 113.85
- 56% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events: CB Consumer Confidence, Fed Chair Yellen Speech, US ADP Non-Farm Employment Change, US Crude Oil Inventories
The US Dollar suffered losses against most major peers on Monday, mainly due to a poor reading of Personal Spending and Core PCE Price Index. The Greenback dropped 0.83% against the British currency, followed by a 0.63%, 0.57% and 0.47% losses against the commodity currencies, namely the Loonie, the Kiwi and the Aussie, respectively. The Euro had the most trouble outperforming the Buck, as the EUR/USD edged only 0.25% higher. However, the American Dollar did manage to appreciate against one major currency, namely 0.33% versus the Yen.
Japan's retail sales climbed slightly for the first time in four months in February, but the overall picture for consumption remains weak. Retail sales increased 0.5% last month from a year earlier, according to the Ministry of Economy, Trade and Industry. The rise followed a 0.2% decrease in January. Measured on a monthly basis, retail sales declined 2.3%. The propensity to consume, a measure of households' willingness to spend rather than save, increased 3.9 points in February, the biggest rise in nine months.
Japanese consumers have spent cautiously in recent months. Last quarter consumer spending was the biggest drag on Japan's economic growth, prompting the world's third biggest economy to shrank 0.3% over the quarter. Domestic consumption has mostly struggled since the government raised the sales tax in 2014. However, policy makers hope that if prices start to increase at a decent pace, consumers will be encouraged to spend, rather than put off purchases hoping that prices will decline. Yet, the Bank of Japan's efforts have been undermined by recent appreciation of the Japanese Yen, which is lowering import prices, thereby making it harder for inflation to reach the 2% target. In addition to that, weaker wages is also making it harder for the central bank to reach the price target, as workers have less disposable income to spend.
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 CB Consumer Confidence and the Fed Chair Yellen Speech
There are only two important events to influence the USD/JPY currency pair. First of all, the Consumer Confidence, released by the Conference Board, captures the level of confidence that individuals have in economic activity. A high level of consumer confidence stimulates economic expansion while a low level drives to economic downturn. The second event is the Fed Chair's Speech, where the US economic outlook and the monetary policy is to be commented on. As a head of the central bank, she has most influence over the nation's currency value.USD/JPY: channel's upper border at risk
Even though the USD/JPY currency pair closed trade at the descending channel's resistance line, upside risks are now higher. A failure to reacquire the bearish momentum today is to lead to the breakout of the channel, with the closest resistance located at 113.85, represented by the weekly R1. In case the immediate resistance is pierced, we should then see the Buck retake the 114.00 yen level and eventually put the tough cluster around 114.75 to the test. However, due to mixed technical indicators in the daily timeframe, there is a possibility that Fed Yellen's dovish statement will push the pair lower towards the weekly PP at 112.53, therefore, preserving the bearish channel.Daily chart
On the hourly chart the USD/JPY currency pair is seen putting the ascending channel's support line to the test again, once against breaching the two-month resistance line. This breach points to a possible US Dollar strength against the Yen in the upcoming days. A retake of the 114.00 level and another confirmation of the channel's upper border would support this view.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 61% of open positions are long, unchanged since yesterday. The sentiment as reported by SAXO Bank remains bullish, slightly stronger than on Monday - 57% of currently open positions are long, up from 56%.
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 29 and March 29, the mean forecast for June 29 is 113.28. At the same time, 24% (equally divided) of the surveyed believe the Greenback could cost either between 117.00 and 118.50 yen in three months, or more than 120.00 yen after a three month period.