- The portion of orders to acquire the US Dollar inched up from 49 to 54%
- Market sentiment remains bullish at 72%
- The weekly R3 and the down-trend around 109.70 represent immediate resistance
- Support is around 108.55
- 54% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: US Retail and Core Retail Sales, US PPI, US Core PPI, US Preliminary UoM Consumer Sentiment, US Business Inventories
The Greenback's performance was similar to the Pound's, as the Buck remained relatively unchanged against most major peers, with volatility registered only against the Aussie, the Yen and the Euro. The US Dollar appreciated the most against the Australian counterpart, which in turn suffered from Australia's inflation expectations falling to a fresh eight-month low. The USD/JPY surged 0.56%, amid a risk-on sentiment, whereas the EUR/USD edged 0.43% lower. At the same time, the Buck lost 0.03% and 0.04% against the Sterling and the Kiwi, respectively, while also inching 0.05% lower against both the Swissie and the Loonie.
The number of American employers posted the most open jobs in eight months in March, but total hiring slowed, The number of Americans filing for unemployment benefits increased last week to a more than one-year high. Economists argued that striking telecommunications workers were possibly the main driver of a rise and said the data did not suggest a deterioration in the overall labour market. Initial jobless claims surged 20,000 to 294,000 in the week ended May 7, the Labor Department reported. That marked the highest level since February 2015. Weekly claims have risen for three weeks in a row. Yet, claims have remained below 300,000 for more than a year, extending the longest such streak since 1973. The four-week moving average of claims, considered a better measure of labour market trends as it smoothes out weekly volatility, increased 10,250 to 268,250 last week, the highest level in almost three months.
Meanwhile, Kansas City Fed President Esther George said interest rates are too low for the current US economy. She said she supports gradual rate hikes, adding that low rates can create economic risks. Low rates can cause interest-sensitive sectors to take on too much debt and grow quickly. George votes on the Fed's policymaking committee and was the only member to vote for a rate lift at the April and March meetings.
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 Retail Sales and PPI
Today's attention is focused on the US fundamental data, namely the Retail and Core Retails Sales, as well as the US PPI and Core PPI. The Retail Sales are released by the US Census Bureau and measure the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. The Core Retail Sales, however, exclude the automobile sector. As for the US PPI, it is released by the Department of Labor and the Bureau of Labor Statistics. It measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Changes in the PPI are widely followed as an indicator of commodity inflation. The Core data excludes the Food & Energy sector.USD/JPY takes another shot at climbing over 109.00
Even though the USD/JPY currency pair appreciated yesterday, the impetus provided was insufficient for the Buck to climb over the 109.00 mark. There is still room for another rally towards the resistance line of the falling wedge pattern, also reinforced by the weekly R3, with a possibility of a breakout from the pattern; however, technical indicators are unable to confirm that. Consequently, the Greenback could sustain another decline towards 108.00, despite being supported by a tough cluster, represented by the 20-day SMA, the weekly R2 and the monthly PP.Daily chart
Once again the USD/JPY currency pair put the 109.40 level to the test, unable to climb over it. At this rate the Greenback could lose the bullish momentum and begin declining towards around 105.70 (previous week's low), unless today's Retail Sales data provides impetus to breach the psychological resistance.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 57% of open positions are long, five percentage points less from Thursday. Meanwhile, the sentiment as reported by SAXO Bank remains bullish at 57%, compared to 55% on Thursday.
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 more than a quarter (31%) of the voters. According to the votes collected between April 13 and May 13, the mean forecast for August 13 is 111.70. At the same time, 20% of the surveyed believe the Greenback could cost between 115.50 and 117.00 yen in three months.
The absolute majority of Dukascopy traders (88.9%), who took part in the Community Forecasts survey last week are bearish on the Pound and see the pair aiming to reach the 1.44 level.
Among the small part of bullish traders Jay said that his bullish prediction is based on technical indicators, backing his stance.
At the same time, Jignesh is with the majority on the USD/JPY, expecting it to edge lower by week's end. "Similar to the EUR/USD, we have a bearish candle. Specifically, a bearish engulfing weekly candle. Signaling to a continuation in the pull back that started last week. Though the GBP is showing some strength in other pairs, this pull back can be shallow in comparison to the rest of the majors," he mentioned.
Compared to the previous week the bullish sentiment gained even more strength, as two thirds of all votes are now set to acquire the American currency versus the Yen. As a result, the average forecast for the pair for the end of this week went up to 107.
Megajorko believes that the USD/JPY could end the week higher. He commented that "After the strong drop in the pair there will surely be a correction. A little information is still given about future Japanese stimulus program and if there are new rumors of returning to bond purchase I think the pair will go again up."
Meanwhile, Jognesh is bearish on the USD/JPY, suggesting that the equity market continues it's bearish cycle globally. "During down trends in equities, we tend to see stronger correlations with JPY which is what we have seen as of late. As well, the BOJ has not given the market much of a reason to continue selling the JPY, and so we can see the pair continue to drift lower," he shared his opinion.
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