- The portion of orders to sell the US Dollar edged higher from 55 to 60%
- Nearly three quarters (73%) of all open positions are now long
- The weekly PP and the monthly S1 at 106.65 represent immediate resistance
- Support is at 106.18
- 50% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: US Retail and Core Retail Sales, US Import Prices
The US Dollar sustained losses against most of other major currencies on Monday, with the only exception being the USD/CAD pair. Meanwhile, the USD/JPY edged 0.66% lower, as the risk-off sentiment was prevailing yesterday. Another significant decline was registered against the European single currency, namely 0.37%, while lesser decline were seen against the Aussie (0.18%), the Sterling (0.11%), the Kiwi (0.06%) and the Swiss Franc (0.05%). The Greenback, however, outperformed its Canadian counterpart, having added 0.42% against it.
The survey indicates that consumers became more concerned about the US economy. Their rating of government economic policy suddenly dropped to the weakest level in almost two years. The recent data shows the growing gap between the most favourable assessments of Current Economic Conditions since July 2005, as well as renewed downward trend of the Expectations Index, which fell by a rather modest 8.6% from the January 2015 peak. Also, the University of Michigan's preliminary consumer sentiment index managed to advance, and was higher than expectation for the current month, but still went down compared to the preceding month's level. The index was 94.3, outperforming the estimates for 94, but still down from 94.7 mark. Moreover, consumers hint that they might increase their savings and delay spending if the pace of job creation does not accelerates. Also, they supposes that inflation will have a minimal impact on their real incomes since long-run inflation expectations plunged 0.2 percentage points to 2.3%, to its record low.
In the meantime, consumers do not think the economy is as strong as it was last year period as well as do not anticipate the economy will show the same financial health in the year ahead as they anticipated a year ago.
Vatsal Srivastava, director at the Blackwater Consulting, explained why the US Dollar advanced against the Yen last week. He said there was nothing fundamentally driving USD/JPY on Monday, but one of the key drivers was the falling oil prices, which was actually boosting the Yen; in analyst's opinion, as there was an addition cause for more QQE. Vatsal Srivastava also mentioned 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 summed up.
US Import Prices, US Retail and Core Retail Sales
Today a number of data could influence the USD/JPY pair. First of all, the US Retail Sales, which measure the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. The Core Retail sales, however, exclude the automobile sector. Furthermore, the US Import Prices are due. They are released by the US Department of Labor, which informs the changes in the price of imported products into the US. The higher the cost of imported goods, the stronger the effect they will have on inflation, redunding in a higher probability of a rate rise.USD/JPY on the edge of slipping below 106.00
The US Dollar edged lower against the Japanese Yen, as risk aversion was dominating the markets on Monday and, as a result, drove the pair almost to the 106.00 level. Technical indicators retain their bearish signals today, suggesting that more bearish momentum is likely to follow. In this case the weekly S1, which is the closest support, is unlikely to prevent the USD/JPY pair from falling deeper down, therefore, more focus should be on the May low of 105.55, while it is also reinforced by the Bollinger band and the weekly S2 today. On the other hand, strong US fundamentals could help the Buck to recover some value, jumping back at least towards the 38.20% Fibo at 106.65.Daily chart
The USD/JPY pair appears to have entered a falling wedge pattern on the hourly chart, but another confirmation of the lower trend-line is required. As a result, we could expect a breach to the upside, impetus for which today's retail sales data or tomorrow's FOMC meeting could provide.
Hourly chart
Nearly three quarters (73%) of all open positions are now long, but the portion of orders to sell the US Dollar edged higher from 55 to 60%.
There is a small but nevertheless bullish bias among OANDA and Saxo Bank traders as well. In case of OANDA, 68% of positions opened by its clients are long. Similarly, 62% of positions opened by Saxo Bank traders are long as well, up from 58% on Monday.
Spreads (avg, pip) / Trading volume / Volatility
Slightly more than a half expect the exchange rate to rise above 114 yen
Exactly half of the surveyed (50%) now assume 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 slightly less than a fifth (18%) of the voters. According to the votes collected between May 14 and June 14, the mean forecast for Sep 14 is 112.26. At the same time, 17% of the surveyed believe the Greenback could cost more than 117 yen in three months.