- The share of sell orders increased from 50 to 55%
- There are 72% of traders being long the Greenback
- The weekly PP around 112.53 represents immediate support
- Resistance is the 20-day SMA at 112.86
- 59% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events: US ADP Non-Farm Employment Change, US Crude Oil Inventories
The US currency weakened against all other major peers, amid the Fed Chair's dovish speech on Tuesday. The largest loss of 1.86% was registered against the New Zealand Dollar, whereas the Buck dropped 1.11% against another commodity-based currency, namely the Aussie. Other notable decline of 0.93% was registered against the Sterling, followed by a 0.86% loss versus both the Euro and the Loonie. The USD/JPY was the best USD cross performer, although it still dropped 0.66% lower.
Fed Chair Janet Yellen insisted on a slower path and more cautious approach to interest rate hikes amid global economic and financial uncertainties, which pose risks to the world's number one economy. In her comments, Yellen said inflation has not yet proven durable against the backdrop of still low oil prices and concerns over China. However, Yellen expected headwinds from slowdown abroad, low oil prices and uncertainty over China to wane and allow the US economy to continue recovering and justify gradual series of rate hikes. Fed policy makers kept interest rates on hold at their March 15-16 meeting and sharply reduced their projected path of interest rate increases this year, foreseeing a total rise of half a percentage point, down from the full percentage point hike they expected in December.
Meanwhile, US consumer confidence recovered in March, as Americans turned positive about the short-term outlook for the US economy. The Conference Board's index of consumer confidence climbed to 96.2 in March from an upwardly revised 94.0 in the prior month. ADP private payrolls report later in the sessions is expected to show that 200,000 positions were added in March, compared with the 205,000 projected for the government's nonfarm payrolls Friday.
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
Wednesday is also rather quiet in terms of data, with only two relevant events scheduled for the day. The first one will be the US ADP Non-Farm Employment Change. The Employment Change, released by the Automatic Data Processing, Inc, is a measure of 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. This is likely to be the main driver for the pair today. The second even is the US Crude Oil Inventories. Itis a weekly measure of the change in the number of barrels in stock of crude oil and its derivates, and it's released by the Energy Information Administration. This report tends to generate large price volatility, as oil prices impact on worldwide economies, affecting the most, commodity related currencies such as the Canadian dollar. Despite it has a limited impact among currencies, this report tends to affect the price of oil itself, and, therefore, had a more notorious impact on WTI crude futures.USD/JPY en route to 112.00
Fed Yellen's statement yesterday caused the USD/JPY currency pair to fall back under the 113.00 level, therefore, preserving the descending channel pattern. As was anticipated, the dips were limited by the weekly PP, but with the Buck now under pressure, this pivot point is expected to be pierced. Consequently, the Buck could sustain sharper losses and close under 112.00, as the closest support is located only around 111.60, represented by the weekly S1 and the Bollinger band. The outlook is that the given pair should keep falling towards the channel's lower border around 110.50. A failure to break through the weekly PP is likely to cause a short-term recovery towards 113.24.Daily chart
At the trend-line intersection the USD/JPY broke out, slumping down to 112.70 yesterday. The 200-hour SMA also failed to hold the losses, with the pair now facing the March low at 110.66, unless some impetus causes a rebound.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 57% of open positions are long, compared to 61% on Tuesday. The sentiment as reported by SAXO Bank remains bullish, slightly stronger than on Tuesday - 60% of currently open positions are long, up from 57%.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 114 yen
The majority (59%) 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 23% of the voters. According to the votes collected between Feb 30 and March 30, the mean forecast for June 30 is 112.86. At the same time, 11% of the surveyed believe the Greenback could cost between 117.00 and 118.50 yen in three months.
Dukascopy Community members have lost their faith in the currency pair, as following a drop to 50% in the army of bulls, this week the number of bullish votes slipped to 46.2%. A vast majority of traders believe that the pair will end this week around 112.7-mark, thus practically unchanged from the price at the moment of writing.
According to Besim, the US Dollar is likely to end the week higher against the Japanese Yen. "The USD/JPY gained 21 points to 113.11 after inflation data this morning came in much lower than expected," he commented, adding that the Asian markets were mostly higher on Friday morning as persistent concerns over a potential Federal Reserve rate hike in April provided some support for Japan shares.
Meanwhile, among the bears, megajorko suggests that USD/JPY has some correlations with stock and indexes. He said that "we can see that they are trying to resume the uptrend but all attempts until now failed so USD/JPY has chances of a strong downtrend."