- The share of buy orders skyrocketed from 17 to 76%
- Bullish market sentiment returned to its previous Tuesday's level of 70%
- The weekly R1 at 109.76 represent immediate resistance
- Support is at 108.70
- 54% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: US Building Permits, US Housing Starts, Japanese Trade Balance
The US Dollar suffered losses against all other major currency on Monday, with the only exception being the USD/JPY, which edged 0.06% higher on risk-appetite, but still unable to surge significantly. The Greenback declined the most against the Sterling (0.51%), followed by a 0.44% loss versus the kiwi and 0.37% against the Swissie. Concerning other commodity currencies: the AUD/USD inched 0.33% higher, while the USD/CAD slumped 0.30%. The smallest loss of 0.26%, however, was registered against the European single currency.
New York Fed President William Dudley said US economic environment is "mostly favourable", but the US central bank remains cautious in hiking interest rates as threats loom. Dudley reiterated he was confident that too-low inflation would climb to a 2% target over the next few years, with "economic conditions have finally warranted the start of U.S. monetary policy normalization." The policy maker repeated his view that the Fed should take a gradual and cautious approach to monetary policy tightening amid significant uncertainties and headwinds to growth stemming from the financial crisis, which have not fully abated.
At the same time, Boston Fed President Eric Rosengren said the US central bank is set to raise interest rates more quickly than investors currently expect. Rosengren said US inflation was now "much closer" to the central bank's goal, downplayed weak growth in the beginning of the year, and said the economy is "fundamentally sound." Rosengren, a voter this year on the Federal Open Market Committee, made his remarks eight days before the FOMC is scheduled to meet to voice officials' views on the economy and set the benchmark federal funds rate. Some policy makers have said they do not anticipate a move, and investors put the chance of an April rate hike at zero. In fact, market participants do not expect another rate increase until 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 Building Permits is the only relevant fundamental release today
Today there is an important economic data release, concerning the US economy, which is the US Building Permits. The Building Permits, released by the US Census Bureau, at the Department of Commerce, shows the number of permits for new construction projects. It implies the movement of corporate investments (US economic development). It tends to cause some volatility to the USD. Earlier tomorrow the Japanese Trade Balance data is due. It is released by the Ministry of Finance and is a seasonal measure of balance amount between export and import. A positive value shows a trade surplus, while a negative value shows a trade deficit. Japan is highly dependent on exports.USD/JPY takes another shot at surging over 109.50
Amid the return of risk-on sentiment, the US Dollar managed to strengthen against the Japanese Yen on Monday, even stabilising above the immediate resistance cluster. The weekly PP and the monthly S2 are now supporting the USD/JPY currency pair, but risks of another decline taking place persisting. In case demand around 108.70 is weak and the Greenback fails to climb over the 109.50 level, the pair will once again face the 18-monh low and the weekly S1 circa 107.65. On the other hand, if the bullish momentum prevails, the weekly R1 will be the first intraday target. Technical studies, however, are in favour of the bearish scenario.Daily chart
Risk appetite keeps driving the USD/JPY, which caused the pair to rebound on Monday. The US Dollar, however, is struggling to maintain trade above the 109.00 major level, awaiting for a boost from fundamental data. On the other hand, the data could weigh on the Greenback, causing the pair to edge back lower towards the 18-month low.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 65% of open positions are long, compared to 54% on Monday. The sentiment as reported by SAXO Bank remains bullish - 57% of currently open positions are long, compared to 60% on Monday.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to rise above 114 yen
More than half of the surveyed (54%) now assumes that the US Dollar is to cost more than 114.00 yen after three month time. The most popular choice implies that the Greenback is to cost somewhere between 114.00 and 115.50 yen in three months, selected by exactly a quarter (25%) of the voters. According to the votes collected between March 19 and April 19, the mean forecast for July 19 is 113.00. At the same time, 12% of the surveyed believe the Greenback could cost between 106.50 and 108.00 yen in three months.