- The number of orders to purchase the US currency edged up from 56 to 66%
- 70% of all open positions are long today
- The weekly PP at 104.87 represents immediate resistance
- Support is at 103.34
- 55% of the survey participants expect the US Dollar to cost more than 109.50 yen in three months
- Upcoming events: Fed Chair Yellen Testimony, US Existing Home Sales, US Crude Oil Inventories
The American Dollar managed to post gains across the board, with the only exception being the NZD/USD currency pair yesterday. With risk-on sentiment returning to the markets, the largest gain of 0.78% was registered against the Japanese Yen, followed by a 0.61% rally against the Euro. Meanwhile, the Cable edged only 0.25% higher, while the USD/CHF remained relatively unchanged, inching higher only 0.01%. The Buck also struggled to outperform commodity currencies, being able to surge only 0.09% versus the Loonie and 0.08% against the Aussie. At the same time, the NZD/USD pair slid 0.07%.
On Tuesday the head of the Federal Reserve, Janet Yellen, stated that there is ‘considerable uncertainty' in US growth outlook. She also brought to attention the fact that some data suggests the US economy keeps growing, but some events, like the upcoming ‘Brexit' referendum, bring the mentioned uncertainty. According to Yellen, the US economy is expected to reach full employment and its 2% inflation target within the next few years. Growing household incomes, improvements in the housing industry, along with low mortgage rates, should trigger improvements in the labour market to appear and, therefore, in the economy overall. Furthermore, Janet Yellen touched the question of the interest rates, explaining that the FOMC has been hesitant to do so due to periodically-disappointing readings in the labour market, as well as inflation remaining below its key target. Also, she assured that some weakness in the labour market should not be considered as a game changer in the Fed's monetary policy decision, as there were strong readings present too.
Finally, she warned about foreign risks, such as the slowdown in global economy, lower inflation and interest rates may cause investor risk appetite to arise. Amid these issues and concerns, the US monetary policy is not heading in only one direction, as adjustments must be made.
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.
Yellen's testimony remains the main event
Federal Reserve governor Janet Yellen's Testimony is due for the second day today. 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. Another event is the US Housing Price Index. It is released by the Federal Housing Finance Agency, which provides an estimated value of housing market conditions. It is an important indicator as the housing market is considered as a sensitive factor to the US economy.USD/JPY traces back to 104.00
The US Dollar managed to appreciate against the Japanese Yen on Tuesday, with risk-on sentiment returning to the markets. The weekly PP succeeded in limiting yesterday's gains and is expected to cause the USD/JPY to weaken today. The bottom target is the monthly S2 at 103.34, but the 104.00 major level might be difficult to pierce as well. According to technical studies, the pair is definitely to decline, as signals are distinctly bearish. On the other hand, Fed's Yellen could provide the Greenback with a boost, causing the weekly PP to give in and, thus, the Buck to retake the 105.00 psychological level.Daily chart
The US Dollar appreciated on Tuesday against the Japanese Yen, with gains limited by the resistance trend-line on the hourly chart. The down-trend is expected to remain intact, causing the pair to sustain more weakness today.
Hourly chart
Today 70% of traders are long the American Dollar, compared to 74% on Tuesday. The number of orders to purchase the US currency edged up from 56 to 66% over the day.
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, 60% of positions opened by Saxo Bank traders are long as well, compared to 57% on Tuesday.
Spreads (avg, pip) / Trading volume / Volatility
Slightly more than a half expect the exchange rate to rise above 109.50 yen
Slightly more than half of the surveyed (55%) now assume that the US Dollar is to cost more than 109.50 yen after three month time. The most popular choice, however, implies that the Greenback is to cost either more than 117.00 yen, or between 112.50 and 114.00 yen, or between 111.00 and 112.50 yen or even between 106.50 and 108.00 yen in three months, all four selected by 15% of the voters. According to the votes collected between May 22 and June 22, the mean forecast for Sep 22 is 109.40. At the same time, 10% of the surveyed believe the Greenback could cost between 109.50 and 111.00 yen in three months.
This week, in contrast, the pair is seen to appreciate as it depicted on the chart, with a number of bulls significantly outweighing bears. USD/JPY is forecasted to reach the 105.3 level by Friday, June 24.
Megajorko suggests that the US Dollar is to strengthen against the Yen by Friday 24 of June. "Although we are in a strong bearish channel, so I suppose there must be some correction this week", he explained his outlook.
Meanwhile, another trader with the Dukascopy Community, bakafx, supposes that price will be between the monthly S2 and the last two-week low.