- The share of orders to sell the US Dollar increased from 68 to 70%
- Bulls take up 73% of the market
- The 55-day SMA and the monthly R1 around 110.45 represent immediate resistance
- Support is at 109.78
- 53% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: FOMC Member Tarullo Speech, US Existing Home Sales, Japanese Trade Balance
The Greenback appreciated against most major peers on Thursday, but also sustained losses against the others, amid a poor reading of the Philly Fed Manufacturing Index. The largest rally was seen against the Canadian counterpart, namely 0.46%, followed by a 0.30% rally against the Swiss Franc and 0.12% versus the European single currency. Concerning the remaining commodity currencies, the Buck remained relatively unchanged against both, edging 0.03% higher versus the Aussie and 0.04% lower against the Kiwi. The Yen regained its safe-haven status, causing the USD/JPY pair to slump 0.21% yesterday, being the largest US Dollar decline.
The number of people seeking US jobless aid plunged from a 14-month high during the last week, partially erasing increases of the last two weeks that had fuelled concerns about rising layoffs. According to the Labour Department, initial applications for state unemployment benefits dropped 16,000 to a seasonally adjusted 278,000 for the week ended May 14. That followed a previous jump to 294,000, which was the highest recorded level since February 2015. Such a decrease was initiated due to fewer filings in New York following the preceding weeks' jump that reflected difficulties adjusting for the spring break holiday. Meanwhile, the four-week moving average, a less volatile measure, rose to 275,500. Claims have now been below 300,000, showing the longest stretch since 1973 meaning a strong job market. A small rate of dismissals, in line with stable hiring, shows companies have confidence in the demand outlook.
The impressive bunch of firmer economic reports was released amid signs that the Federal Reserve probably could raise interest rates again. The minutes from the US central bank's for the April 26-27 policy meeting, published on Wednesday, revealed that most officials are considering raising rates in June in case data continued to point to an improvement in second-quarter growth.
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 Existing Home Sales is the only relevant event
Friday is rather quiet in terms of fundamental data releases, with only one event to influence the USD/JPY pair scheduled for the day, namely the US Existing Home Sales. The US Existing Home Sales, released by the National Association of Realtors, provide an estimated value of housing market conditions. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD. However, early morning on Monday the Japanese Trade Balance data is due, which is likely to set the mood for the Asian session that day.USD/JPY in tight range between 109.80 and 110.50
The USD/JPY currency pair underwent a corrective decline on Thursday, but was unable to breach any significant technical level. Therefore, the outlook remains unchanged, as the Greenback is still located between a relatively strong resistance from above and the weekly R1 providing support from below. Price also appears to be anchored to the 100.00 mark, thus, a close around this area is expected. Furthermore, technical indicators are now giving mixed signals in all timeframes, bolstering the possibility of the Buck remaining unchanged against the Yen for another day.Daily chart
The USD/JPY pair has been in a bullish trend almost since the beginning of the month, as it is clearly seen on the hourly chart. Some consolidation periods occur from time to time and this is what is expected to happen today, with upside risks present.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 60% of open positions are long, one percentage point less from Thursday. Meanwhile, the sentiment as reported by SAXO Bank edge closer to the equilibrium, as 51% of traders are long the Buck, compared to 52% yesterday.
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 (53%) 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 (27%) of the voters. According to the votes collected between April 20 and May 20, the mean forecast for August 20 is 111.63. At the same time, 23% of the surveyed believe the Greenback could cost between 115.50 and 117.00 yen in three months.
Nevertheless, Dukascopy Community members are still bullish on the pair, with 66% of respondents having positive view.
This week megajorko, a trader with the Dukascopy Community, remains bullish on the USD/JPY pair. "It was so close to 110 but presently the level is formed as a strong resistance I suppose. I am not sure but I think that during FOMC it will be broken but it will be short lived and there are some signs of a start of a trend down after all," he said, also adding that "the revision of Japanese stimulus program is giving some boost to yen and the only thing that stopped a powerful spike down in the pair is the present USD power."
At the same time, Likerty suggests that the Buck is to weaken against the Japanese Yen by the end of the week. "Interestingly enough, US Dollar might move in opposite directions in regards of its stance against European majors and Yen. The USD/JPY has unfinished business around 107.60's and later - 104.80's," Likerty commented. In his view while the US Dollar is set to go stronger against other major peers and precious metals, it could go weaker against the Yen. "It is a sign of upcoming positioning for June's Brexit risk event," he added.