- The share of buy orders edged up from 52 to 58%
- Market sentiment remains bullish at 73%
- The 55-day SMA and the monthly R1 around 110.35 represents immediate resistance
- Support is around 109.70
- 52% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: US Markit Services PMI, US Crude Oil Inventories, US Durable and Core Durable Goods Orders, US Jobless Claims, US Pending Home Sales, US House Price Index
The Buck managed to outperform most of major currencies on Tuesday, with exception of the Loonie and the Sterling. Rather mild gains of 0.71% and 0.69% were registered against the Euro and the Japanese Yen, respectively. Greenback also outperformed two out of three commodity currencies, having added 0.56% versus the Aussie and 0.37% versus the Kiwi, while another small rally of 0.39% was detected against the Swiss Franc. On the other hand, the US Dollar slipped 0.15% against the Loonie, while a sharp loss of 1.03% was seen against the British Pound, due to the TSC Report Hearings.
US new-home sales surged the most in more than eight years while prices advanced to a record level, pointing to healthy demand alongside limited supplies across the housing market. Purchases of new, single-family homes soared 16.6% in April from a month earlier to a seasonally adjusted annual rate of 619,000, according to the Commerce Department, adding to signs of growing confidence in the economy's prospects. That was the quickest pace since January 2008. Moreover, data for February and March were revised to show 39,000 more units sold than previously reported. Economists had predicted new home sales, which make up about 10.2% of the housing market, increasing to only a 523,000 unit-rate last month. The median price of a new home rose to $321,100 in the reported month. That was up 9.7% from a year earlier and the highest level on record.
The new home sales report came in the wake of fairly positive data on home resales and residential construction. It also added to retail sales and industrial output reports in suggesting that the world's number one economy was gaining momentum after growth slowed to a 0.5% annualized rate in the first quarter.
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 Services PMI and US House Price Index
Today's attention falls on the US data. First of all the US Services PMI, which is released by the Markit Economics. It captures business conditions in the services sector. As the services sector dominates a large part of total GDP, the services PMI is an important indicator of the overall economic condition in the US. Second, the US Housing Price Index, which provides an estimated value of the housing market conditions. It is an important indicator as the housing market is considered as a sensitive factor to the US economy.USD/JPY attempts to post more gains
The US Dollar managed to appreciate against the Japanese Yen yesterday, almost completely negating Monday's losses, with trade closing at the 110.00 mark. As a result, the rising wedge pattern was preserved, but due to the pattern's nature downside risks persist, despite technical indicators giving bullish signals in the daily timeframe. The closest area to limit the losses is located circa 109.70, namely the weekly PP and the wedge's support line. Meanwhile, the 55-day SMA is the level that is preventing the Buck from climbing further above the 110.00 level, also reinforced by the monthly R1. Consequently, a possible rally is unlikely to exceed the 110.50 mark.Daily chart
The USD/JPY managed to rebound yesterday, with the exchange rate returning within the borders of the rising wedge pattern. The pair is now expected to attempt and resume trade within the borders, thus, another rally is likely to take place.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 56% of open positions are long, three percentage points more from Tuesday. Meanwhile, the sentiment as reported by SAXO Bank remains close to the equilibrium, as 51% of traders are still long the Buck, unchanged since Tuesday.
Spreads (avg, pip) / Trading volume / Volatility
Slightly more than a half expect the exchange rate to rise above 114 yen
Slightly more than a half of the surveyed (52%) 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 25 and May 25, the mean forecast for August 25 is 111.16. At the same time, 21% of the surveyed believe the Greenback could cost between 115.50 and 117.00 yen in three months.
The closing level hit the 110 mark, just above Monday's 109. At the same time, 60% of Dukascopy traders, who participated in the weekly quiz, forecasted the US Dollar to rise in value.
Megajorko retains a positive outlook towards the USD/JPY currency pair. "There are more neutral signs than any bear/bull signals, so I suppose the pair will try to reach the magic 111.11 number," he mentioned.
Meanwhile, nuonrg believes the Buck is to weaken against the Yen. "The pair is in a down trending channel on the daily. Although it came from monthly weekly support, it has still got many resistance to make further upside possible," he said, also adding that "It closed weak, slowed down. Although anything is possible, I look to target price lower. First on a missed weekly pivot and perhaps lower on the channel."