- The number of orders to acquire the US Dollar edged up from 30 to 58%
- Nearly three quarters (74%) of all open positions are long
- The 55-day SMA, the monthly R1 and the up-trend around 110.45 represent immediate resistance
- Support is around 109.70
- 51% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events: FOMC Member Bullard Speech, US Markit Manufacturing PMI, US New Home Sales
The US Dollar experienced mixed performance over the weekend, with the largest gain of 0.77% registered against the British Pound. Against the remaining major currencies the Buck's performance was rather mild, being that the USD/JPY edged only 0.17% higher, the USD/CAD inched up only 0.15% and the Greenback appreciated 0.07% against the Aussie. However, against the remaining commodity currency, the American Dollar suffered a 0.31% loss, followed by a 0.18% decline versus the Euro, also remaining relatively unchanged (-0.04%) against the Swiss Franc.
US home resales continued to rise, increasing more than expected in April, as housing demand strengthens alongside gradual job growth and ultra-low interest rates. Sales surged 1.7% in April from the previous month to a seasonally adjusted annual rate of 5.45 million, the National Association of Realtors reported. Economists had predicted sales would climb 1.3% to a rate of 5.40 million in April. Sales soared 6.0% from a year ago. Nevertheless, there were regional variations. While sales of existing homes surged in the Midwest by 12.1% last month and also increased in the Northeast, the South and West declined. Thus, affordability remains a key issue. The national median sale price for a previously owned home last month stood at $232,500, up 6.3% from a year earlier, marking the 50th consecutive month of year-over-year gains. Prices are rising at a far faster rate than most workers' wages, average weekly earnings adjusted for inflation climbed just 1.3% in April from April last year.
Also, the NAR said there were 2.14 million existing homes available for sale at the end of April, up 9.2% from March as sellers put their homes on the market for the spring selling season. However, compared with April a year ago, inventory declined 3.6%. That is a 4.7-month supply at the current sales pace.
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 Markit Manufacturing PMI is the only relevant event today
There is only one significant event to have an impact on the USD/JPY currency pair today, namely the US Markit Manufacturing PMI. The US Manufacturing PMI is released by the Markit Economics, which captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the manufacturing PMI is an important indicator of business conditions and the overall economic condition in the US. Readings above 50 imply the economy is expanding, making investors understood it as a bullish for the USD, whereas a result below 50 points for an economic contraction, and weighs negatively on the currency.USD/JPY slips back under 110.00
As was anticipated, the USD/JPY currency pair remained close to the 110.00 level, unable to pierce the immediate resistance at the end of the previous week. Even though the Greenback is now consolidating against the Yen, the current rising wedge pattern, that is now entering a fourth week, implies a breakout to the downside, with further continuation of the bearish trend to take place afterwards. Today, however, a breakout is doubtful, as technical studies in all timeframes retain mixed signals, the exchange rate being drawn towards the 110.00 mark and the wedge's lower boundary being bolstered by the weekly PP around 109.70.Daily chart
The USD/JPY is facing the rising wedge's support line, which is bolstered by the 200-hour SMA today. Technically, the pair should retreat from its intraday low and possibly even end the day in the green zone.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 55% of open positions are long, five percentage point less from Friday. Meanwhile, the sentiment as reported by SAXO Bank remained unchanged over the weekend, with 51% of all open positions being short.
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 less 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 exactly a quarter (25%) of the voters. According to the votes collected between April 23 and May 23, the mean forecast for August 23 is 111.22. At the same time, 25% of the surveyed believe the Greenback could cost between 115.50 and 117.00 yen in three months.