- The share of buy orders dropped from 66 to 52%
- 65% of all open positions are long
- Support rests at 99.78
- The weekly S1 at 100.55 represents immediate resistance
- 58% of the survey participants expect the US Dollar to cost less than 105.00 yen in three months
- Upcoming events: Philadelphia Fed manufacturing Index, US Initial Jobless Claims, FOMC Member Dudley Speech
US core consumer prices grew less than expected last month, official data showed on Tuesday. According to the Department of Labor, the core Consumer Price Index (CPI) rose 0.1% on a monthly seasonally adjusted basis in July, compared to the 0.2% hike seen in the previous month. Economic desks expected the core CPI to remain unchanged from June. On an annual basis, core inflation increased 2.2% in the reported month, while market analysts predicted the indicator to come in at 2.3% in July, unchanged from last month. Including food and energy, consumer prices dropped to 0.0% month-over-month in the seventh month of the year, down from the 0.2% upturn registered in June, but in line with analysts' expectations. Year-over-year, inflation added 0.8% last month, compared to the 1.0% increase seen in the first month of summer. The US CPI data along with the latest retail sales figures added to concerns about the health of the US economy, raising doubts as to whether the Federal Reserve will increase interest rates this year, as it formally adopted a 2% inflation target back in January 2012.
Meanwhile, other data released on Tuesday showed that building permits fell 0.1% to 1.152 million units in July, after rising 1.5% to 1.153 million units in the preceding month, while markets pencilled in an increase of 0.5% to 1.159 million in the reported month.
US Jobless Claims and Philadelphia Fed Manufacturing Index
There are not many events to influence the USD/JPY pair's performance today, namely the Initial Jobless Claims and the Philadelphia 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 Philadelphia Fed Manufacturing Index is a spread index of manufacturing conditions within the Federal Reserve Bank of Philadelphia. This index, served 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 remains on the back foot
The FOMC Minutes somewhat disappointed yesterday, causing the USD/JPY currency pair to retreat from its intraday highs. Ultimately, the pair remained flat on Wednesday, as demand at the 100.00 psychological level was sufficient to keep the exchange rate elevated. However, the Buck remains under the risk of falling below the 100.00 mark, with technical studies supporting this scenario. The weekly S2, located at 99.78, is the closest support, while a much stronger cluster rests around 98.75.Daily chart
The USD/JPY pair appears to be trading within the borders of a falling wedge pattern, which usually ends with an upside breakout. However, both trend-lines require an additional confirmation to determine the pattern's viability. At least one border is expected to be confirmed today.
Hourly chart
Bullish market sentiment barely changed over the past 24 hours, as 65% of all open positions are now long (previously 64%). There are significantly less orders to acquire the Greenback, as their share dropped from 66 to 52% over the day.
Sentiment at Saxo Bank is virtually the same - 65% of the Denmark-based clients are currently holding long positions. Traders at OANDA are even more confident in Dollar's appreciation - as many as 73% of open positions are long. Using the data as a contrarian indicator, the sentiment implies a cheaper Dollar. There is little room for new buyers to enter the market, and if the bulls start closing positions on profit-taking, this could create a strong selling pressure.
Spreads (avg, pip) / Trading volume / Volatility
Slightly more than a half expect the exchange rate to fall below 105.00 yen
Slightly more than half of the surveyed (58%) now assume that the US Dollar is to cost less than 105.00 yen after a three month time. The most popular choice, however, implies that the Greenback is to cost more than 109.50 yen in three months, selected by 20% of the voters. According to the votes collected between July 18 and August 18, the mean forecast for November 18 is 103.78. At the same time, 18% of the surveyed believe the Greenback could cost somewhere between 99.00 and 100.50 yen in three months.