- The number of orders to acquire the Buck edged down from 62 to 58%.
- 72% of all open positions are long
- Immediate resistance lies around 109.00
- The closest support rests at 108.19
- Upcoming events: US Crude Oil Inventories, US Beige Book, Japanese Trade Balance, Philadelphia Fed Manufacturing Index, US Initial Jobless Claims
US homebuilding activity dropped more than expected last month amid the unusually warm weather and weaker manufacturing activity, official figures revealed on Tuesday. The US Department of Commerce reported that housing starts fell 6.8% to a seasonally adjusted rate of 1.22M, as construction of single-family homes in the Midwest posted the largest decline since 2014. Meanwhile, market analysts anticipated a slighter drop to a 1.25M unit rate in March, following the preceding month's upwardly revised 1.30M unit rate. On an annual basis, housing starts were up 9.2%. Data also showed that building permits climbed to a 1.26M unit rate in March, compared to the previous month's upwardly revised 1.22M unit rate, whereas analysts expected a rise to 1.25M unit rate.
Separately, the Federal Reserve reported that manufacturing output plunged 0.4% in March, driven by a 3.0% decrease in the motor vehicle and part sector. On a yearly basis, manufacturing output advanced 2.7% in the Q1 of 2017. Both reports raised concerns over the Fed postponing its second rate hike this year. Moreover, the data suggested that the US economy performed weaker than expected in the Q1. Following Tuesday's releases, the US Dollar hit its three week low against a basket of major currencies.
Relatively quiet Wednesday
Among relevant fundamental data today the US Beige Book is probably the most important one. It reports on the currency US economic situation. Through interviews with key business contacts, economists, market experts and other sources, information is gathered by each of the 12 Federal Reserve Districts. The survey gives a picture of the overall US economic growth. An optimistic view of those authorities is considered to be positive for the USD. From the Japanese Side the Trade Balance is due. It is released by the Ministry of Finance and is a seasonal measure of balance amount between import and export. A positive value shows a trade surplus, while a negative value shows a trade deficit. Japan is so much dependent on exports. Tomorrow attention could be paid to the Philadelphia Fed Manufacturing Survey, which is a spread index of manufacturing conditions within the Federal Reserve Bank of Philadelphia. This survey, 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 attempts to regain bullish momentum
The Greenback was unable to outperform the Japanese currency yesterday, which resulted in a failure to preserve the descending channel pattern. Nevertheless, the Buck is not ready to give up and is likely to take another shot at pushing higher in order to settle above the channel's support line. The 200-day SMA is unlikely to provide resistance at this point, but the monthly S1 at 108.17 is the level to focus on, as it prevented the US Dollar from edging higher four times now. Meanwhile, technical indicators are unable to confirm the possibility of the positive outcome, but signals are no longer bearish.Daily chart
The USD/JPY currency pair appears to be anchored around the channel's lower trend-line, unable to leave this 108.00-109.50 trading range. Nevertheless, if the 109.20 area, the monthly S1, is overcome, the pair is still to face the 200-hour SMA around 109.50. Before this level is reclaimed - downside risks persist.
Hourly chart
Market sentiment remains strongly bullish, as 72% of all open positions are long (previously 73%). The number of orders to acquire the Buck edged down from 62 to 58%.
Right now 65% of OANDA clients are bulls, compared to 62% on Tuesday, the bullish sentiment has been holding around the same level for some time now. In the meantime, Saxo Bank clients retain a positive outlook towards the US Dollar, with their sentiment being close to ours, being that 69% of their open positions are now long and the remaining 31% are short.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish on the Dollar
According to the poll that gathered forecasts between March 19 and April 19, traders expect the US Dollar to appreciate to 111.19 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 under 114 yen, which is above the current spot price. The majority of people voted expect the US Dollar to cost somewhere between 108.00 and 109.50 yen in three months, with 15% of the survey participants choosing this trading range. At the same time, the second most popular interval was the 112.50-114.00 one, with 13% of survey participants choosing it.