- The portion of buy orders plunged from 72 to 46%
- 71% of traders hold long positions
- The 20-day SMA, the weekly and the monthly PPs around 106.50 represent immediate resistance
- Support is around 105.40
- 66% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: 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 American Dollar managed to recover and post gains across the board, after having suffered losses against most major peers on Monday. On Tuesday the Greenback appreciated 2.44% against the Australian counterpart, as the RBA cut its interest rate unexpectedly. Concerning the other two commodity currencies, the USD/CAD edged 1.55% higher, while the NZD/USD fell 1.52% lower. At the same time, the Cable suffered a 0.95% loss due to a poor reading of the UK Manufacturing PMI. The smallest gains of 0.32% and 0.18% were registered against the Euro and the Yen, respectively, whereas the Buck remained relatively unchanged against the Swiss Franc, adding only 0.01%.
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.
US ADP Non-Farm Employment Change and US Services PMI
Today among the important economic data releases is the US ADP Non-Farm Employment Change. 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 continues to climb higher
The USD/JPY currency pair remained relatively unchanged for the second day yesterday, having inched only 17 pips higher. After a sharp two-day slump at the end of the previous week, the Greenback appears to have entered a corrective bullish trend. Although gains are not substantial, the pair is expected to edge higher for the third consecutive day. Immediate resistance is represented by the 20-day SMA, the weekly and the monthly PPs around 108.50. Meanwhile, the nearest area to limit the dips, in case US Services PMI disappoints today, is located circa 105.40, namely the Bollinger band and the 20-month low, as technical studies retain mixed signals.Daily chart
Upon reaching a lower low yesterday, the USD/JPY currency pair appears to have begun recovering. Nevertheless, a climb over the 200-hour SMA is required in order to confirm the bullish trend; otherwise, risks of falling towards the 105.20 level, namely the 20-month low, remain.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 71% of open positions are long, six percentage points higher from Tuesday. The sentiment as reported by SAXO Bank remains bullish - 57% of currently open positions are long, unchanged since Tuesday.
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 (66%) 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 more than a quarter (29%) of the voters. According to the votes collected between April 04 and May 04, the mean forecast for August 04 is 113.54. At the same time, 28% of the surveyed believe the Greenback could cost between 115.50 and 117.00 yen in three months.
The pair is expected to reach 108.60 by this Friday. The overall sentiment is still bullish, with 68% of all opened positions being long, while attitude towards the greenback is still extremely bullish.
According to Jignesh, a trader with the Dukascopy Community, "last week's price action on the back of an announcement from the BOJ showing some renewed commitment may have traders looking at this pair with the view that the longer term up trend may have continued." He also added that "dips should be supported in this pair as it gets bought up further this week."
At the same time, Trendmaster suggests that the USD/JPY trend was uncertain, as the BoJ was expected to cut its policy rate and scale up its qualitative easing.