- The portion of orders to purchase the US Dollar now takes up 52% of the market
- 74% of all open positions are long
- The weekly PP at 109.76 represents immediate resistance
- Support is at 108.93
- 50% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: US New Home Sales, US Goods Trade Balance, US Crude Oil Inventories, US Markit Services PMI
The US Dollar experienced mixed performance on Monday, having appreciated against some major peers, but also declined against the others.The Greenback suffered the most against the safe-haven Yen, as risk-off sentiment drove the USD/JPY 0.93% lower. At the same time, the Buck remained relatively unchanged against the Swiss Franc and the Aussie, having edged 0.08% and 0.02% lower, respectively. The American Dollar also added 0.10% versus the Sterling, 0.03% against the Euro and 0.01% versus the New Zealand Dollar, while the largest gain of 0.23% was detected against the Loonie.
Business activity in the US manufacturing sector continued to decline in May with new orders increasing at the slowest rate so far this year, as manufacturers have been hit hard by a stronger US Dollar and tepid global demand. Markit's preliminary manufacturing PMI eased to 50.5 this month, down from 50.8 in April, when it logged the worst performance since September 2009. The gauge remained well below the post-crisis average of 54.1. A renewed decline in production was one key factor weighing on the headline index in May, alongside softer new order growth and further cuts to stocks of inputs.
The data comes at a time when the whole sector has been facing stark headwinds blowing from Greenback's appreciation, a slowing China's economy, and a volatile stock market. Furthermore, lower oil prices have hit manufacturers tied to the energy industry, undermining burgeoning domestic production, lowering demand for steel and drilling equipment and other manufactured products used in the industry. Nevertheless, last week the US Federal Reserve increased expectations for a June interest rate hike by saying the market was not taking the possibility of a hike seriously enough, according to the minutes of its latest policy meeting.
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 New Home Sales is the only relevant event
There is only one relevant event to influence the USD/JPY currency pair today, namely the US New Home Sales. The New Home Sales are released by the US Census Bureau and are an important measure of housing market conditions. House buyers spend money on furnishing and financing their homes so as a result the demand for goods, services and the employees is stimulated. With no data expected from Japan, tomorrow the US Housing Price Index will be the main driver. It is released by the Federal Housing Finance Agency and provides an estimated value of housing market conditions. It is an important indicator as the housing market is considered as a sensitive factor to the US economy.USD/JPY to preserve the rising wedge
The risk-off sentiment drove the USD/JPY currency pair lower on Monday, having put the rising wedge's support line to the test. As a result, the pair opened below that trend-line, but a positive development today is to preserve the pattern. The weekly PP is now the closest resistance, located at 109.76, but a surge towards the 55-day SMA is also possible, which kept the pair at bay through most of the previous week. Technical indicators are bolstering the probability of the positive outcome, as they are now giving bullish signals.Daily chart
Although on the hourly chart the US Dollar breached the rising wedge's lower boundary yesterday, the exchange rate was unable to stabilise below the 200-hour SMA. As a result, price could rebound today, therefore, contributing to the preservation of the wedge.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 53% of open positions are long, two percentage points less from Monday. Meanwhile, the sentiment as reported by SAXO Bank edge closer to the equilibrium, as 51% of traders are long the Buck, compared to 52% previously.
Spreads (avg, pip) / Trading volume / Volatility
Exactly a half expect the exchange rate to rise above 114 yen
Exactly a half of the surveyed (50%) 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 (26%) of the voters. According to the votes collected between April 24 and May 24, the mean forecast for August 24 is 111.26. At the same time, 20% of the surveyed believe the Greenback could cost between 115.50 and 117.00 yen in three months.