- The share of buy orders skyrocketed from 37 to 77%
- Nearly three quarters (74%) of traders are long the Buck
- The weekly PP at 102.46 represents immediate resistance
- Support is around 101.40
- 53% of the survey participants expect the US Dollar to cost less than 108.00 yen in three months
- Upcoming events: US Trade Balance, US Services PMI and FOMC Meeting Minutes
The new orders for US manufactured goods declined 1.0% in May following a revised 1.8% advance during the previous month, being a slightly steeper decrease than the 0.8% consensus forecast. Moreover, there was a 1.9% drop on a yearly basis in total orders, while excluding transport there was a 3.4% annual loose. Meanwhile, there are some hints of a gradual expansion in conditions, but not enough to trigger a significant shift in sentiment towards the economy. Meanwhile, there was a recovery in energy-sector orders after the very steep drop occurred during the previous month, although total durable goods orders still went down 2.3% following a 3.2% gain the previous month. Although, there was a 1.6% annual rise in durable goods orders. Demand for mining and energy-related equipment slipped 5.8% after a 20.8% plunge in the prior month.
Overall, the data suggests stabilisation in the industrial sector with an advance in unfilled orders and lower inventories likely to support production during the next few months. Nevertheless, the rate of improvement still is relatively limited.
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 Trade Balance, US Services PMI and FOMC Meeting Minutes
Among important fundamental events today the US Services PMI and the US Trade Balance are due. The Trade Balance is a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the USD. The US Services PMI is released by both the Markit Economics and the Institute for Supply Management, captures business conditions in the services sector. As the services sector dominates a large part of total GDP, the services PMI is an important indicators of the overall economic conditions in US. However, the most important event will be the FOMC Meeting Minutes. FOMC stands for the Federal Open Market Committee, that organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate.USD/JPY attempts to preserve the trend-line
As was anticipated, the risk-off sentiment drove the USD/JPY currency pair lower on Tuesday, putting the eight-month support line to the test. The Greenback now risks breaking this trend-line if more weakness persists, despite the support line being reinforced by the weekly S1. Another tough support cluster is located around 100.60, namely the 50.0% Fibo, the Bollinger band and the weekly S2. On the other hand, technical indicators are giving bullish signals, suggesting that the US Dollar is to appreciate against the Yen. In this case the closest area to limit the gains is the weekly PP at 102.46.Daily chart
As was expected, the USD/JPY currency pair dropped lower on Tuesday, but with the 50.0% Fibo managing to limit the losses. According to the hourly chart, the pair could rebound and climb back above the 102.00 major level today, opposed to the main outlook of the daily chart.
Hourly chart
Nearly three quarters (74%) of traders are long the Buck today, compared to 73% yesterday. Meanwhile, the share of buy orders skyrocketed from 37 to 77%.
There is a small but nevertheless bullish bias among OANDA and Saxo Bank traders as well. In case of OANDA, 66% of positions opened by its clients are long. Similarly, 59% of positions opened by Saxo Bank traders are long as well, compared to 60% yesterday.
Spreads (avg, pip) / Trading volume / Volatility
Slightly more than a half expect the exchange rate to fall below 108.00 yen
Slightly more than half of the surveyed (53%) now assume that the US Dollar is to cost less than 108.00 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 06 and July 06, the mean forecast for Oct 06 is 106.58. At the same time, 14% of the surveyed believe the Greenback could cost between 111.00 and 112.50 in three months.