- The portion of buy orders inched up from 54 to 55%
- Market sentiment is now equally divided between bulls and bears
- The weekly R1 and the Bolligner band around 107.40 represent immediate resistance
- Support is around 106.50
- 52% of the survey participants expect the US Dollar to cost less than 106.50 yen in three months
- Upcoming events: US Philly Fed Manufacturing Index, US Jobless Claims, US Existing Home Sales, US HPI
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.
US Jobless Claims, Philly Fed Manufacturing Index and US Housing Starts
Among important data today are the US Initial Jobless Claims. 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. The final event is the US Housing Price Index, 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 attempts to post more gains
The Greenback managed to prolong its short-term bullish trend against the Japanese Yen yesterday, but unable to reclaim the 107.00 major level. Today technical indicators retain bullish signals, implying that more bullish momentum could follow; however, weekly studies now suggest that the USD/JPY currency pair could undergo the anticipated decline, causing a drop towards 106.00. A successful breach of the immediate resistance, represented by the weekly R1 and the Bollinger band, is to open the door for a rally towards the 100-day SMA at 108.34, which in turn is the final obstacle on the way to the six-month down-trend.The US Dollar reconfirmed the Ascending channel's lower boundary yesterday and managed to climb over the 38.20% Fibo. Some psychological resistance appears to be represented by the 107.50 level, a breach of which is required for the USD/JPY to reach the pattern's upper border.
Hourly chart
Market sentiment is now equally divided between bulls and bears, whereas the portion of buy orders inched higher—from 54 to 55%.
There is a small but nevertheless bullish bias among OANDA and Saxo Bank traders as well. In case of OANDA, 56% of positions opened by its clients are long. Similarly, 52% of positions opened by Saxo Bank traders are long as well, compared to 51% on Wednesday.
Spreads (avg, pip) / Trading volume / Volatility
Slightly more than a half expect the exchange rate to fall below 106.50 yen
Slightly more than half of the surveyed (52%) 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 25% of the voters. According to the votes collected between June 21 and July 21, the mean forecast for Oct 21 is 105.63. At the same time, 12% of the surveyed believe the Greenback could cost between 100.50 and 102.00 yen in three months.