- The share of sell orders returned to its Monday's level of 62%
- Traders' sentiment takes up 73% of the market
- The Bollinger band around 110.40 represents immediate resistance
- Support is around 110.25
- 51% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events: US Crude Oil Inventories, FOMC Members Mester and Bullard Speeches, FOMC Meeting Minutes
Although the Buck appreciated against most major peers on Tuesday, a rather serious loss was registered against the Japanese Yen. The USD/JPY pair edged 0.90% lower, amid risk aversion returning to the markets, while another decline of 0.29% was detected against the Swiss Franc. The Greenback gained 0.80% versus the Aussie, but only 0.44% and 0.37% against the other commodity currencies, namely the Kiwi and the Loonie, respectively. The Cable surged 0.73%, amid ‘Brexit' fears weighing on the Pound, while the EUR/USD remained relatively unchanged (down 0.05%).
The US trade balance ballooned in February to the highest level in six months as a surge in imports exceeded a slight pickup in overseas shipments. The trade shortfall widened 2.6% to $47.1 billion from a revised $45.9 billion in January, the Commerce Department said. In February, exports of goods climbed 1.6% to $118.6 billion, while overall exports of goods and services rose 1.0% to $178.1 billion. The increase in exports was the first in five months and reflects the struggle manufacturers face due to a strong US Dollar, which makes US-made goods less competitive in a weaker global marketplace. At the same time, imports climbed 1.3% to $225.1 billion, recording the biggest monthly increase in a year. The report joined data on consumer and business spending in suggesting that the US economic growth slowed further in the first quarter after moderating to a 1.4% annualized rate in the final three months of 2015. Growth estimates for the first quarter are currently below a 1% pace.
A separate report showed US services sector reported a higher economic activity in March. An index of nonmanufacturing activity increased to 54.5 in March from 53.4 the preceding month, the Institute for Supply Management reported. Nonmanufacturing industries account for more than 80% of the US economy. The sector has grown for six years, though its expansion cooled earlier this winter.
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.
FOMC Meeting Minutes ahead
Even though there are no significant economic data releases scheduled for today, an important event, namely the FOMC Meeting Minutes, is still likely to have an impact on USD pairs. FOMC stands for The Federal Open Market Committee that organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.USD/JPY struggles to preserve the channel
Risk aversion caused the USD/JPY currency pair to experience a decline on Tuesday, with the pair edging lower towards the descending channel's support line. Although the channel lower border should trigger a rebound, risks of the pattern being broken are also high. Technical studies support the negative outlook with their bearish signals, while a catalyst for the movement in either direction is required, which today's FOMC meeting should provide. A fall towards 109.00 major level is expected if bears take over the market, but if bulls prevail, the US Dollar might even climb back over the 111.00 mark.Daily chart
For more than a week now the USD/JPY is trading in a bearish trend, having reached the lowest level in more than a month. The pair, however, is supported by a bearish trend-line, which is expected to limit the dips if more bearish momentum is to come.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 66% of open positions are long, compared to 67% on Tuesday. The sentiment as reported by SAXO Bank remains bullish - 64% of currently open positions are long, up from 62% on Tuesday.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 114 yen
The majority (51%) 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 to cost somewhere between 106.50 and 108.00 yen in three months, selected by 21% of the voters. According to the votes collected between March 06 and April 06, the mean forecast for July 06 is 113.07. At the same time, 13% of the surveyed believe the Greenback could cost between 117.00 and 118.50 yen in three months.
Dukascopy Community members grew more bearish towards the USD/JPY currency pair, being that 60% of traders are now short the US Dollar and the remaining 40% are long.
Panzer, a trader with a bullish outlook towards the USD/JPY currency pair. "The USD/ JPY is moving in a small range and it is clear that the USD will continue to strengthen in the future", he commented.
Meanwhile, megajorko, another trader with the Dukascopy Community, believes that the US Dollar is to edge lower against the Yen. He said that "the Yen is gaining power and after the USD weaknesses I am expecting that the downward channel will continue. Although, the possibility still remains that pair will return to 120 level."