- The number of purchase orders increased from 52 to 61%
- Nearly three quarters (74%) of traders hold long positions
- The weekly PP at 104.87 represents immediate resistance
- Support is around 103.40
- 51% of the survey participants expect the US Dollar to cost less than 112.50 yen in three months
- Upcoming events: US Markit Services PMI, FOMC Member Powell Speech, Fed Chair Yellen Testimony
The Greenback sustained rather serious losses last Friday and over the weekend, with the largest decline registered against the British Pound. The GBP/USD pair surged 1.09%, due to the EU referendum polls shifting in favour of ‘Bremain'. At the same time, slightly weaker depreciations were registered against the Loonie, the Swissie, the Euro and the Aussie, as the Buck edged 0.56%, 0.52%, 0.45% and 0.43% lower against them, respectively. The NZD/USD and the USD/JPY both remained relatively unchanged, with the US Dollar suffering the least and inching down 0.16% against the Kiwi and 0.10% against the Yen.
As reported by the US Census Bureau, there were 1.164 million constructions of residential buildings started in the US in May. The data beat expectations of 1.15 million, while still being below the April's reading of 1.172 million. During the previous month there was a sharp increase in the construction, but a lot of homes on the market became less affordable, amid a rather sharp increase in prices for those homes. Mortgage rates, however, are at low levels, somewhat boosting demand for apartment and house acquisitions, but, nonetheless, for some prices remain too high. Single-family houses have a higher impact than apartments, as they provide a larger economic boost and they rose 0.3% up to 764,000, while apartments showed only 396,000 residences, thus, barely changed compared to the previous month's data.
Furthermore, only 1.138 million building permits for construction were issued in the US last month, with the data slightly failing to meet expectations of 1.15 million. Among permits the single-family ones provided concerns, as they showed the largest monthly slowdown during the past 15 months. The permits for houses dropped 2% down to 726,000 units, while the apartment permits were at 381,000 units. This weaker data is unlikely to have a serious effect on the GDP second estimate, as it is forecasted to show signs of improvement, being driven by higher demand in household.
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.
Uneventful Monday
There are no important economic data releases scheduled for Monday, but on Tuesday from the US side, the Markit Services PMI is due. The Services PMI is released by the Markit Economics, 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. Another even is Fed Yellen's Testimony. As head of the central bank, which controls short-term interest rates, she has more influence over the nation's currency value than any other person. More insight concerning future interest rate hikes and the overall economic condition in the US is expected.USD/JPY risks falling back to 104.00
The US Dollar failed to rebound against the Japanese Yen last Friday, but remained above the 104.00 psychological level. Furthermore, the pair opened with a small bullish gap today, suggesting that a drop below that mark is doubtful, although technical indicators imply otherwise. The weekly PP, which acts as the immediate resistance, is likely to prevent the Buck from advancing, therefore, a drop back towards the 104.00 level is expected to take place. In case the bears manage to push the Greenback even lower, the next target will be the 103.40 level, where the monthly S2 coincides with the Bollinger band.Daily chart
The USD/JPY currency pair dropped below the 104.00 mark on Thursday and remained close to that level through Friday. More downward pressure is expected to fall on the pair, pushing it lower until parity is reached. The upside border is still represented by the resistance line just above 105.00.
Hourly chart
Nearly three quarters (74%) of traders hold long positions today (previously 72%). Meanwhile, the number of purchase orders increased from 52 to 61%.
There is a small but nevertheless bullish bias among OANDA and Saxo Bank traders as well. In case of OANDA, 69% of positions opened by its clients are long. Similarly, 56% of positions opened by Saxo Bank traders are long as well, compared to 59% on Friday.
Spreads (avg, pip) / Trading volume / Volatility
Slightly more than a half expect the exchange rate to fall below 114 yen
Slightly more than half of the surveyed (51%) now assume that the US Dollar is to cost less than 112.50 yen after three month time. The most popular choice, however, implies that the Greenback is to cost higher than 117.00 yen in three months, both selected by 16% of the voters. According to the votes collected between May 20 and June 20, the mean forecast for Sep 20 is 111.36. At the same time, 14% of the surveyed believe the Greenback could cost between 114.00 and 115.50 yen in three months.