- 52% of all pending orders are to acquire the Greenback
- 53% of traders hold long positions
- Immediate resistance lies at 115.11
- The closest support rests around 114.63
- Upcoming events: US CPI and Core CPI, US Retail Sales and Core Retail Sales, Federal Funds Rate
The seasonally adjusted Producer Price Index for final demand rose 0.3% in February, the Bureau of Labour Statistics revealed on Tuesday. Over 80% of the increase in final demand Index was associated with 0.4% advance in prices for final demand services. The Index for final demand goods, in contrast, advanced only 0.3%. The surge in final demand services was mainly driven by traveller accommodation services, which increased 4.3%, while the rise in final demand goods was mostly attributable to higher electric power prices, which rallied 1.6%. In general, the price advance for total final demand in February was half of the January rise. With respect to intermediate demand, prices for unprocessed goods plunged 0.2%, while prices for processed goods jumped 0.4% and prices for services climbed 0.5%. Prices of processed goods posted the sixth straight monthly increase, driven by a 0.5% spike in prices for processed materials less foods and energy.
In contrast, the surprising fall of prices for unprocessed goods was attributed to a 4.3% drop in the price of unprocessed energy materials. In terms of products, the rise of prices for processed goods was attributable to higher demand for primary basic organic chemicals and higher services prices. The slip of prices for unprocessed goods was triggered by lower natural gas prices, which went 18% down.
US CPI, Retail Sales and Federal Funds Rate decision
A number of important US fundamentals is due today, such as the CPI and Retail Sales. The CPI is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchase power of USD is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. The Core CPI, however, excludes volatile products, such as food and energy, in order to capture an accurate calculation. Meanwhile, the US Retail Sales measure the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. The Core figure excludes the automobile sector. Nevertheless, the most important event today is the Federal Funds Rate decision. With a pre-set regularity, a nation's Central Bank has an economic policy meeting, in which board members took different measures, the most relevant one being the interest rate that it will charge on loans and advances to commercial banks. In the US the Board of Governors of the Federal Reserve meets at intervals of five to eight weeks, in which they announce their latest decisions. A rate hike tends to boost local currency, as it is understood as a sign of a healthy inflation. A rate cut, on the other hand, is seen as a sign of economic and inflationary woes and, therefore, tends to weaken the local currency. If rates remain unchanged, attention turns to the tone of the FOMC Statement, and whether the tone is hawkish or dovish over future developments of inflation.USD/JPY: downside risks persist
Strong PPI was insufficient to cause any substantial volatility on Tuesday, but the USD/JPY pair still remained relatively unchanged for the third consecutive day. Some signs suggest the US Dollar is to strengthen again, such as the technical indicators—they are giving strong bullish signals. A possible rate hike today also suggests the Buck could post gains, however, that implies the ascending channel pattern is likely to be broken to the upside. From the technical perspective a plunge would be more probable, as that would preserve the pattern and an eventual retest of the up-trend circa 113.00, where the USD could receive sufficient momentum to pierce the two-year down-trend.Daily chart
The US Dollar keeps riding the 200-hour SMA, reluctant to fall back under it. Basically, the hourly chart just confirms the situation of the daily one, with the exception of the given SMA providing additional support. .
Hourly chart
There are 53% of traders holding long positions (previously 59%), while only 52% of all pending orders are to acquire the Greenback.
Right now 54% of OANDA clients are bulls, compared to 51% on Tuesday. In the meantime, Saxo Bank clients retain a positive outlook towards the US Dollar, being that 60% of their open positions are now long and the remaining 40% are short.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish on the Dollar
According to the poll that gathered forecasts between February 15 and March 15, traders expect the US Dollar to appreciate to 115.07 yen in three months' time, while the forecast for March 31 was 117.66 yen. It is also worth noticing that 68% of all forecasts fall above 114 yen, which is above the current spot price. The majority of people voted expect the US Dollar to cost somewhere between 118.50 and 120.00 yen in three months, with 20% of the survey participants choosing this trading range. At the same time, the second most popular interval was the 114.00-115.50 one, with 16% of survey participants choosing it.