- The portion of buy orders slid from 53 to 48%
- Market sentiment remains bullish at 73%
- The 55-day SMA at 110.06 represents immediate resistance
- Support at 109.76
- 52% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events: US Preliminary GDP, Reuters/Michigan Consumer Sentiment Index, Fed Chair Yellen Speech, Japanese Retail Sales
The US Dollar declined against all other major currencies on Thursday, despite rather strong US Durable and Core Durable Goods Orders data, with the only exception being against the British Pound. The largest losses of 0.39% and 0.37% were registered against the Japanese Yen and the Aussie, respectively. The Greenback also edged 0.35% lower against the European single currency, followed by a 0.31% slump against the Loonie. The NZD/USD currency pair, however, remained relatively unchanged, having surged 0.02%, while the Cable edged 0.19% higher over the day.
In April, domestic manufacturers were negatively affected by weak news, though some recently published mixed industrial reports. According to the Commerce Department, orders for durable goods, items ranging from phones to aircraft, surged 3.4% after an upwardly revised 1.9% advance in March. Previously reported durable goods, for March posted a 1.3% increase in March. Strong demand for long-lasting US manufactured goods advanced in April due to orders from transportation sector, namely commercial planes. These orders accounted for 85% of the increase in April bookings. Typically large planes are built or delivered in five years after they are ordered. Nevertheless, companies have been reluctant to invest more heavily because of a tepid global economy and falling exports.
The number of Americans applied for unemployment benefits last week dropped more than expected last week, moving back to near cycle lows as the labor markets remain healthy and the economy regains momentum after stumbling in the first quarter. According to the Labour Department, weekly applications for unemployment aid plunged 10,000 to a seasonally adjusted 268,000 for the week ended May 21. Sustained decrease in claims from the one-year peak address was spurred by transitory events such as the spring break holiday at schools as well as auto plant shutdowns in Michigan.
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 GDP Annualized, Reuters/Michigan Consumer Sentiment Index and Japanese Retail Sales
Friday brings a number of US economic data releases, which are likely to have an impact on the USD/JPY pair's performance today. First of all, the US Annualized GDP, which is released by the US Bureau of Economic Analysis and shows the monetary value of all the goods, services and structures, produced within a country in a given period of time. GDP Annualized is a gross measure of market activity because it indicates the pace at which a country's economy is growing or decreasing. Second, the Reuters/Michigan Consumer Sentiment Index, which is a survey of personal consumer confidence in economic activity. It shows a picture of whether or not consumers are willing to spend money. The Final event is Fed Chair Yellen's Speech. As the head of the central bank, who controls short-term interest rates, she has more influence over the nation's currency value than any other person. During the weekend the Japanese Retail Sales Data is due, which captures aggregate sales, made through a business location (usually a store) in which the principal activity is the sale of merchandise and related services to the general public, for household or personal consumption. Consumer spending is a key important indicator for the Japanese economy.USD/JPY struggles to preserve the wedge pattern
Once again the US Dollar weakened against the Yen yesterday, unable to climb over the 110.25 level. The 110.25 mark appears to be providing strong resistance, as the USD/JPY currency pair was unable to climb beyond that area for two weeks now. Furthermore, the rising wedge's support line was put to the test again, which could lead to an ultimate downside breakout today. Trade opened on top of the weekly PP, but in case the bearish momentum prevails, the pair could even fall below the 109.00 mark. However, technical studies imply that a bullish development is due, with the 110.25 area remaining a phantom resistance.Daily chart
Even though the US Dollar attempted to rebound from the 200-hour SMA, the regained bullish momentum was insufficient to maintain trade above the 100.00 mark. The pair is now struggling to remain above the 200-hour SMA, awaiting for the GDP data for support.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 57% of open positions are long, two percentage points more from Thursday. Meanwhile, the sentiment as reported by SAXO Bank remains close to the equilibrium, as 53% of traders are still long the Buck, compared to 51% on Thursday.
Spreads (avg, pip) / Trading volume / Volatility
Slightly more than a half expect the exchange rate to fall under 114 yen
Slightly more than a half of the surveyed (52%) 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 more than a quarter (27%) of the voters. According to the votes collected between April 27 and May 27, the mean forecast for August 27 is 110.95. At the same time, 16% 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."