Yet again the Yen attempts to push the Buck below 106.00

Source: Dukascopy Bank SA
  • Sell orders take up 63% of the market
  • 72% of traders are long the US Dollar
  • The weekly S1 at 106.18 represents immediate resistance
  • Support is around 105.30
  • 53% of the survey participants expect the US Dollar to cost more than 112.50 yen in three months
  • Upcoming events: US PPI and Core PPI, Empire State Manufacturing Index, US Capacity Utilization Rate, US Industrial Production, US FOMC Statement, US Federal Funds Rate
© Dukascopy Bank SA

Due to a rather strong reading of the US Retail Sales, the Greenback managed to outperform most major currencies on Tuesday. The largest gain of 1.10% was registered against the British Pound, which in turn suffered from ‘Brexit' concerns. Another sharp rally was seen against the New Zealand Dollar (0.97%), followed by a 0.77% gain versus the European single currency. Concerning other commodity currencies, the US Dollar was able to add 0.39% against the Aussie and 0.27% versus the Loonie. Nevertheless, positive fundamentals were insufficient to help the Buck outperform the Swissie and the Yen.

The US retail sales advanced more than expected during the previous month since Americans bought automobiles and a range of other significant goods, hinting that economic growth was gaining momentum despite a weak job creation. According to the Commerce Department release made on Tuesday, retail sales rose 0.5% in May after surging by an unrevised 1.3% in April. It is the second straight month of lifted gains from a year ago. The gains were spurred mainly by non-store retailers, online shopping and gasoline stations spending. Compared with a year earlier, the total amount of sales, in turn, expanded 2.5%. That is highly above the annual rate of inflation, which currently equals 1% this year. Overall, retail sales have strengthened considerably during the past two months despite a slow start at the beginning of the current year.

Meanwhile, stabile gains in consumption will spur the economy helping to accelerate from a weak beginning at the start of the year and strengthening forecasts made by Federal Reserve officials that the economic slowdown is temporal. Moreover, a pickup in wages also will help ensure that households remain a mainstay of the economic expansion.

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.

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FOMC Statement is the main driver today

Most impact on the USD/JPY pair today is likely to be by the Federal Funds Rate decision. With a pre-set regularity, a nation's Central Bank has an economic policy meeting, in which board members took different measures, the most relevant one, being the interest rate that it will charge on loans and advances to commercial banks. In the US, the Board of Governors of the Federal Reserve meets at intervals of five to eight weeks, in which they announce their latest decisions. A rate hike tends to boost the local currency, as it is understood as a sign of healthy inflation. A rate cut, on the other hand, is seen as a sign of economic and inflationary woes and, therefore, tends to weaken the local currency. If rates remain unchanged, attention turns to the tone of the FOMC statement, and whether the tone is hawkish, or dovish over future developments of inflation. Prior to that a number of fundamental data is likely to steer the pair before the FOMC statement is due.



Yet again the Yen attempts to push the Buck below 106.00

The US Dollar appears to be reluctant to fall below the 106.00 major level, as most losses keep getting erased once the exchange rate approaches the May low of 105.55. Nevertheless, the Greenback now finds itself in front of the weekly S1, which is weighing on the currency by acting as the immediate resistance level. At the same time, the nearest support is still represented by the May low, as well as the weekly S2 and the lower Bollinger band. Technical indicators also suggest the USD/JPY pair is to weaken for the fourth time in a row, but the main drivers remain the FOMC meeting minutes and the Yen's safe haven status.

Daily chart
© Dukascopy Bank SA

The USD/JPY pair confirmed the falling wedge pattern yesterday and is now facing the wedge's upper border. Usually a breakout occurs to the upside in such patterns, but in this case there is an extra resistance, represented by the 38.20% Fibo and the 200-hour SMA, that could limit the bullish development.

Hourly chart
© Dukascopy Bank SA


Most SWFX traders are long USD/JPY

Today 72% of traders are long the US Dollar, whereas the majority of all pending orders are to sell it, taking up 63% of the market.

There is a small but nevertheless bullish bias among OANDA and Saxo Bank traders as well. In case of OANDA, 71% of positions opened by its clients are long. Similarly, 62% of positions opened by Saxo Bank traders are long as well, unchanged since Tuesday.


Spreads (avg, pip) / Trading volume / Volatility



Slightly more than a half expect the exchange rate to rise above 114 yen

© Dukascopy Bank SA

Exactly half of the surveyed (53%) now assume that the US Dollar is to cost more than 112.50 yen after three month time. The most popular choices imply that the Greenback is to cost somewhere either between 114.00 and 115.50 yen or even higher than 117.00 yen in three months, both selected by 16% of the voters. According to the votes collected between May 15 and June 15, the mean forecast for Sep 15 is 111.79. At the same time, 11% of the surveyed believe the Greenback could cost between 112.50 and 114.00 yen in three months.

More than 61% of respondents are having bearish view on the pair, the consensus forecast stands for 105.9, meaning traders do not believe bulls will be able to close above the 200-period SMA and will finish this week right at the weekly pivot.

According to nuonrg, a trader with the Dukascopy Community, the US Dollar is to outperform the Japanese Yen, being that "on a monthly chart the USD is at support above the 104. Intraday levels have closed last week on a higher low on daily with RSI sloping up."

At the same time, PisakJanos is bearish on the matter. "Things became normal on Tuesday at 9:00 UTC (balance regained after a huge fall) and continued to decrease in the normal pace until Wednesday 8:20 UTC, (London not opened yet). Expecting to break through support at 106.256 on Monday, when FED chair Yellen speaks," he commented.

© Dukascopy Bank SA

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