- The share of purchase takes up 54% of the market
- Bulls are outnumbering the bears by only two percentage points
- The 55-day SMA and the 38.20% Fibo around 106.50 represent immediate resistance
- Support is at 103.90
- 50% of the survey participants expect the US Dollar to cost less than 106.50 yen in three months
- Upcoming events: US Crude Oil Inventories, US Jobless Claims, US Existing Home Sales, Philadelphia Fed Manufacturing Index
US housing starts and building permits rose in June, a sign that the country's housing market remained on solid footing at the end of the second quarter. Housing starts rebounded 4.8% on a monthly and seasonally adjusted basis to 1.189 million in June, sharply up compared with the market's expectation of a rise to 1.1150 million. Moreover, the US Census Bureau reported that contractors took out an additional 1.5% permits for construction of new dwellings in June, totalling 1.1153 million permits in the final month of Q2 2016. Analysts had expected an advance in the indicator to 1.165 million permits in the reported month. Housing starts are seen as an important pillar of the US economy. They not only reflect demand for housing, but also are an important catalyst for the construction sector.
Moreover, residential construction added around 0.6 percentage points to first quarter gross domestic product. That was the biggest contribution in over six years. Meanwhile, building permits, a gauge of residential building intentions rose 4.8% to a seasonally adjusted annual pace of 1.189 million units. Permits had declined in two of the past three months. In addition, earlier this week, the latest data revealed that builder sentiment in the US ticked down in July, but pointed to ongoing housing growth.
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 middle of the week
There are no significant events to influence the USD/JPY pair today or the whole week for that matter. However, tomorrow some impact may be caused by the Initial Jobless Claims data release and the Philly Fed Manufacturing Index. The Jobless Claims are a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labor market. A larger than expected number indicates weakness in this market, which influences the strength and direction of the US economy. The Philly Fed Manufacturing Index is a spread of manufacturing conditions within the Federal Reserve Bank of Philadelphia. It serves as an indicator of manufacturing sector trends, is interrelated with the ISM Manufacturing Index. And the Index of Industrial Production. It is also used as a forecast of the ISM Index.USD/JPY faces the 55-day SMA again
The USD/JPY currency pair remained completely flat on Tuesday, due to lack of impetus, as US fundamentals broadly fell in line with expectations. Moreover, the pair is located under a couple of strong resistances, with the most important level among them being the 55-day SMA, as it kept the Greenback at bay since the previous week. Even though technical indicators imply a bullish development is due, we should not rule out the risks of the Buck falling down to the 105.00 major level, which somewhat acts as an interim support area before the immediate cluster around 104.00.The US Dollar continued to trade within the borders of an ascending channel pattern yesterday, additionally confirming the lower boundary earlier today. The 38.20% Fibo somewhat prevented the USD/JPY pair from appreciating yesterday and is expected to provide some resistance today as well, increasing downside risks.
Hourly chart
Market sentiment remains unchanged, with bulls outnumbering the bears by only two percentage points. Meanwhile, the share of purchase orders also remains the same, taking up 54% of the market.
There is a small but nevertheless bullish bias among OANDA and Saxo Bank traders as well. In case of OANDA, 55% of positions opened by its clients are long. Similarly, 51% of positions opened by Saxo Bank traders are long as well, compared to 52% on Tuesday.
Spreads (avg, pip) / Trading volume / Volatility
Exactly half expect the exchange rate to fall below 106.50 yen
Slightly more than half of the surveyed (50%) now assume that the US Dollar is to cost less than 106.50 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 26% of the voters. According to the votes collected between June 20 and July 20, the mean forecast for Oct 20 is 105.60. At the same time, 11% of the surveyed believe the Greenback could cost between 100.50 and 102.00 yen in three months.