- The share of buy orders surged from 45 to 72%
- 72% of traders hold long positions
- The 20-day SMA, the weekly and the monthly PPs around 106.60 represents immediate resistance
- Support is around 105.74
- 65% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: FOMC Member Mester Speaks, US ADP Non-Farm Employment Change, US Preliminary Nonfarm Productivity and Unit Labor Costs, US Trade Balance, US Markit Services PMI, US ISM Non-Manufacturing PMI, US Factory Orders, US Crude Oil Inventories
The US Dollar sustained losses against all other major currencies, due to a poor reading of the US Manufacturing PMI data yesterday. The largest loss was registered against the Aussie (0.80%), followed by a 0.72% decline versus the Euro, 0.60% against the Kiwi and 0.57% versus the Swiss Franc. Other notable losses were seen against the British Pound, namely 0.42%, while the USD/CAD edged 0.21% lower. At the same time, the USD/JPY currency pair remained relatively unchanged over the day.
The US manufacturing sector expanded at a more moderate pace in April, partly due to a slowdown in new orders, but an increase in export orders to the highest level in more than a year offered hope for the sector. The Institute for Supply Management reported its index of factory activity slid to 50.8 last month, down from 51.8 in March. Despite the decline, April marked the second consecutive month of expansion and was the second highest reading in the last eight months. The US manufacturing sector has been struggling due to a strong US Dollar and moribund global demand. In addition to that, lower oil prices have derailed manufacturers tied to the energy industry.
Separately, the Commerce Department reported construction spending rose 0.3% in March to its highest level since October 2007, following an upwardly revised 1.0% gain in February. The US economic growth slowed to a 0.5% annualized rate in the first three months of the year. The revised February construction spending figures appeared to be much higher those used in the advance first-quarter GDP estimate. Economists predict GDP growth for the first three months of the year will be revised up to a 0.7% rate. Given a fairly strong labour market, which is anticipated to underpin tepid consumer spending, economists expect gross domestic product growth to rebound in the second quarter.
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.
Relatively quiet Tuesday
There are no important events to influence the USD/JPY pair today, but on Wednesday the ADP Non-Farm Employment Change is due. It is released by the Automatic Data Processing Inc. and 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. Another important event will be the US Services PMI, which captures business conditions in the services sector. As services sector dominates a large part of total GDP, the services PMI is an important indicator of the overall economic condition in the US.USD/JPY puts 106.00 to the test
Even though the Greenback managed to edge higher against the Yen yesterday, thus, confirming the bullish recovery, but gains accounted for only 20 pips. With such a small rally, risks of the USD/JPY currency pair sustaining another serious loss persist. As a result, the Buck could drop under the 106.00 major level, the lowest level in almost 20 months. The closest area to limit the losses rests around 105.70, represented by the Bollinger band, whereas the second target is the 105.20 mark, namely the 20-month low. Furthermore, a complete breach of the 106.00 level might spark the BoJ to intervene, ultimately causing investors to sell the Japanese currency.Daily chart
Even though the USD/JPY pair remained relatively unchanged over the day, the pair is precipitously edging lower now. At this rate, the 20-month low of 105.20 could soon be reached, while the next target will be the 2014 low of 100.77.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 65% of open positions are long, two percentage points lower from Monday. The sentiment as reported by SAXO Bank remains bullish - 57% of currently open positions are long, three percentage point more from 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 (65%) 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 115.50 and 117.00 yen in three months, selected by more than a quarter (28%) of the voters. According to the votes collected between April 03 and May 03, the mean forecast for August 03 is 113.64. At the same time, 26% of the surveyed believe the Greenback could cost between 114.00 and 115.50 yen in three months.