- Numbers of buy and sell orders are perfectly equal
- US Dollar is strongly overbought against the Japanese Yen
- Resistance is seen at 102 yen
- Floor is to be provided by 100.70
- 52% of the survey participants expect the US Dollar to cost less than 108.00 yen in three months
- Upcoming events: US ISM Non-Manufacturing PMI, ADP Non-Farm Employment Change, Crude Oil Inventories
With yesterday's data on inflation and personal spending failing to justify a stronger Greenback, USD/JPY fell nearly 1.5% after plummeting more that 3% last Friday. Meanwhile on Monday, the US manufacturing activity contracted in July after Britain's decision to leave the European Union, official data from the Institute for Supply Management (ISM) revealed on Monday. The ISM announced that its Purchasing Managers' Index (PMI) came in at 52.6 points in the seventh month of the year, compared to last month's 53.2, its highest one-year result, whereas market analysts anticipated a slight decrease to 53.1 in the reported month. Nevertheless, the Index remained above the 50 level, which indicates expansion in manufacturing. The Index is based on data collected from about 400 manufacturing firms across the United States.
Other data released on Monday showed the US manufacturing sector remained in the expansionary region, as the seasonally adjusted Markit final Manufacturing PMI for the United States equals 52.9 points in the same month, following last month's 51.3 mark and hitting its highest level since October 2015, when it climbed to 54.1 points. The July flash PMI posted 52.9, while economic desks expected the preliminary reading to come in at 51.5 points.
US data to be slightly bearish
Today's afternoon trading promises to be rather active for USD/JPY. There are going to be three major releases on the state of the United States economy. The first one, namely a report from ADP, is to give a hint what to expect from Friday's non-farm payrolls, and two hours later we will get to know whether the services sector in the world's largest economy is able to keep up the pace of growth and whether crude oil inventories in fact declined.USD/JPY probes 2014 low
After a brief pause on Monday USD/JPY resumed the sell-off from 107. However, right now the currency pair is facing a major demand area on the outskirts of 100, created by the 2014 low and 50% retracement of the 2012-2015 move at 107. A month ago a similar attempt of the pair to break this level failed, but this time the support area has no reinforcement in the form of the lower bound of the nine-month bearish channel, which increases the chance of the bearish outcome. At the same time, the technical indicators are mostly pointing lower.Daily chart
The hourly chart of USD/JPY confirms that the pair is actively seeking a path through 100.70, but the sellers are currently unable to do anything with the strong demand. As long as support between 100.70 and 100.00 remains intact, we will thus stay bullish on the pair.
Hourly chart
Positioning in the market also favours a decline, as the US Dollar is strongly overbought against the Japanese Yen: nearly two thirds of all open positions are long. Meanwhile, the numbers of buy and sell orders are perfectly equal.
OANDA traders are about as bullish as Dukascopy traders, with 68% of positions opened with Canada-based broker being long. Saxo Bank clients are somewhat less optimistic with respect to the ability of the Dollar to outperform the Yen, but there are still noticeably more bulls (58%) than there are bears (42%).
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 (52%) now assume that the US Dollar is to cost less than 108.00 yen after a 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 19% of the voters. According to the votes collected between July 01 and August 01, the mean forecast for November 01 is 106.46. At the same time, 18% of the surveyed believe the Greenback could cost more than 112.50 yen in three months.