- The share of buy orders rose to 63%
- 52% of traders hold long positions
- The weekly R1 at 103.51 represents immediate resistance
- Support is at 102.46
- 56% of the survey participants expect the US Dollar to cost more than 109.50 yen in three months
- Upcoming events: US Factory Orders, FOMC Member Dudley Speech
Factories across the US reported on a strong jump in production during June, being spurred by a accelerated foreign demand for US goods. According to the Markit release, the purchasing managers' index went up to 51.3 last month, up from 50.7 in May, thus reaching a three-month high. However, it is worth to point out, that the data was revised down slightly from the flash estimate of 51.4. The following numbers show that weakness in the April and May readings confirms that the second-quarter overall was the weakest since the third quarter of 2009, but there are still hopes that sector is stabilising. Moreover, there was a rise in new orders at the strongest pace since March, while export orders, in turn, ticked up at the fastest pace since September 2014.
Overall, a slight softening in the dollar from the record levels being reached late last year and at the beginning of 2016 has helped US firms sell more goods abroad, while stabilization in the price of crude oil has helped factories connected to the energy patch. In the meantime, manufacturing trends will have relatively small impact on Federal Reserve policy decisions, since the Fed is more concerned with the reassurance that the industrial sector is showing signs of stabilisation.
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.
Quiet Monday
There is a bank holiday in the US on Monday and no relevant data is scheduled from Japan, therefore, no sharp movements are expected. However, on Tuesday traders could pay attention to the US Factory Orders, which are a measure of the total orders of durable and non-durable goods, such as shipments (sales), inventories, and orders at the manufacturing level, which can offer insight into inflation and growth in the manufacturing sector.USD/JPY attempts to continue rising
A period of risk-aversion on Friday caused the USD/JPY currency pair to lose more than 60 pips, but without any significant level getting breached. Technical studies retain mixed signals today as well, therefore, the Greenback is expected to be relatively calm during the day. The weekly PP at 102.46 is the closest support, just below the opening price, while the weekly R1 at 103.51 represents immediate resistance. The bullish development is more likely to occur, although more weakness could follow, leading the exchange rate to another retest of the trend-line at 101.53.Daily chart
The USD/JPY pair has formed an ascending channel pattern on the hourly chart, where the pair has been trading through all of the previous week. The 200-hour SMA keeps weighing on the pair, thus, risks of a downside breakout are present.
Hourly chart
There are currently 52% of traders holding long positions, compared to 57% last Friday. Meanwhile, the share of buy orders added seven percentage points, having risen up to a total of 63%.
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, unchanged since Friday.
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 (56%) 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 between 108.00 and 109.50 yen in three months, selected by 17% of the voters. According to the votes collected between June 04 and July 04, the mean forecast for Oct 04 is 107.84. At the same time, 15% of the surveyed believe the Greenback could cost between 111.00 and 112.50 in three months.