- The number of sell orders inched up from 46 to 54%
- 71% of all open positions are long
- The 20-day SMA at 108.75 represents immediate resistance
- Support is around 108.39
- 51% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: US Empire State Manufacturing Index, US NAHB Housing Market Index, US Building Permits, US CPI and Core CPI, US Housing Starts, US Capacity Utilization Rate, US Industrial Production, Japanese Preliminary GDP
A positive reading of the US Retail Sales and the PPI data caused the American Dollar to outperform most of other major currencies on Friday and over the weekend. A decline in oil prices caused the Buck to gain the most against commodity currencies, namely 0.76% against the Aussie and 0.73% versus both the Loonie and the Kiwi. At the same time, the US Dollar added 0.62% versus the Sterling and 0.61% against the Euro, while the USD/CHF surged 0.52%. However, the US currency also suffered a 0.36% loss against the safe-haven Yen, somewhat boosted by weak Chinese Industrial Production data.
US retail sales surged the most in a year in April as Americans boosted purchases of automobiles and a range of other goods, suggesting the economy was regaining momentum after growth almost stalled in the first quarter. According to the Commerce Department, retail sales advanced 1.3% last month, the largest increase since March 2015. March's retail sales were revised up to a 0.3% decline compared with the previously reported 0.4% drop. Stripping out automobiles, gasoline, building materials and food services, retail sales climbed 0.9% in April following an upwardly revised 0.2% gain in March. If consumers can spur stronger economic growth in the coming months, that could influence the Fed's decision on when to hike its benchmark interest rate. Macroeconomic Advisers revised its expectation for second-quarter GDP growth to a 2.3% annualized increase from 2%. Barclays raised its forecast to 2.2% from 2%. The Federal Reserve Bank of Atlanta's real-time estimate of economic growth moved to a 2.8% rise, from the prior estimate of 2.2%.
Separately, consumer confidence rebounded to its strongest level in nearly a year in May. The University of Michigan preliminary consumer sentiment index for May came in at 95.8, compared with a final April reading of 89.0.
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.
NAHB Housing Market Index and the Empire State Manufacturing Index
Monday is rather quiet in terms fundamental data releases, with the main accent being on the US data, such as the Empire State Manufacturing Index and the NAHB Housing Market Index. The NAHB Housing Market Index is released by the National Association of Home Builders. It represents home sales and expected home buildings in the future indicating housing market trend in the United States. The growth rate of the housing market affects the USD volatility at some rate. At the same time, the Empire State Manufacturing Index, which is conducted by the Federal Reserve Bank of New York, gauges business conditions for New York manufacturers. Generally speaking, a positive result is bullish for the US Dollar, while a negative result shows poor growth of US Dollar.USD/JPY attempts to retake 109.00
The US Dollar failed to outperform the Yen on Friday, as the safe-haven status of the Japanese currency caused the pair to bounce back from the falling wedge's resistance line and close with a 40-pip slump. The 20-day SMA represented immediate resistance today, but is unlikely to prevent the USD/JPY currency pair from edging higher if the bullish momentum prevails. The second target is located around 109.60, namely the wedge's upper border and the weekly R1. Meanwhile, technical studies are giving mixed signals, suggesting that a possibility of the bearish outcome exists, but the monthly PP, which is the closest support, is now bolstered by the weekly PP and is not ready to give in.Daily chart
The US Dollar is expected to have trouble to continue outperforming the Japanese Yen, as the resistance trend-line was confirmed on Friday and the bearish momentum is now likely to prevail. The pair could fall towards 108.10, where the 200-hour SMA is located, while Wednesday's FOMC Meeting Minutes could cause a breakout from the falling wedge pattern.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 61% of open positions are long, four percentage points more from Friday. Meanwhile, the sentiment as reported by SAXO Bank remains bullish at 56%, compared to 57% on Friday.
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 (51%) 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 (28%) of the voters. According to the votes collected between April 16 and May 16, the mean forecast for August 16 is 111.44. At the same time, 20% of the surveyed believe the Greenback could cost between 115.50 and 117.00 yen in three months.