- The portion of buy orders edged up from 58 to 53%
- 73% of all open positions are long
- The monthly R1 at 110.53 represents immediate resistance
- Support is around 109.80
- 51% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: US Durable and Core Durable Goods Orders, US Jobless Claims, US Pending Home Sales
The US Dollar experienced poor performance on Wednesday, as it declined against almost all other major currencies. The largest decline was recorded against the Canadian counterpart, namely 0.78%, as the BoC's decision to leave its key overnight rate unchanged at 0.5% boosted the Loonie. Another significant loss of 0.42% was detected against the British Pound, followed by a 0.22% slump versus the Aussie and 0.21% against the Swissie. The EUR/USD went up 0.12%, while the Buck remained relatively unchanged against the New Zealand Dollar, edging only 0.03%. Meanwhile, the USD/JPY currency pair managed to appreciate on Wednesday, being driven by the return of risk appetite.
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 Durable and Core Durable Goods Orders
Among important economic data releases today are the US the Durable and Core Durable Goods Orders. The Durable Goods Orders are released by the US Census Bureau, they measure the cost of orders received by manufacturers for durable goods, which means goods planned to last for three years or more, such as motor vehicles and appliances. As those products often involve large investments, they are sensitive to the US economic situation. The final figure shows the state of US production activity. The Core Durable Goods Orders, however, exclude the transport sector.USD/JPY struggles to remain above 110.00
As was anticipated, the USD/JPY pair's volatility was limited by the 110.50 level yesterday, but the exchange rate still closed lower, namely on top of the 55-day SMA. The mentioned SMA, the rising wedge's support line and the weekly PP now form a strong cluster around the 100.00 mark, which technically should prevent the US Dollar from sustaining more losses. On the other hand, the Yen strengthened earlier today, as the Japanese vice-minister of finance stated that the BoJ intervention measures will not be implemented. According to technical studies the given pair is to edge higher, but US fundamentals are unlikely to turn overwhelmingly positive in order to boost the Buck.Daily chart
The US Dollar continued to trade within the borders of the rising wedge pattern yesterday, initially indicating that it is to be preserved. However, a sharp slump earlier today caused a breakout, thus, more bearish momentum could follow, unless the 200-hour SMA provides sufficient demand.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 55% of open positions are long, one percentage point less from Wednesday. Meanwhile, the sentiment as reported by SAXO Bank remains close to the equilibrium, as 51% of traders are still long the Buck, same as on Tuesday and Wednesday.
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 (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 (27%) of the voters. According to the votes collected between April 26 and May 26, the mean forecast for August 26 is 111.04. At the same time, 20% 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."