- 54% of all pending orders are to acquire the US Dollar
- 52% of all open positions are long
- The nearest resistance significant resistance is near 109.40
- The 109.00 mark is a potential turnaround point
- Upcoming events: US JOLTS Job Openings, US Crude Oil Inventories, US Consumer Credit, Japanese Final GDP, Japanese Current Account
Business activity in the US non-manufacturing sector fell last month but remained in the expansion territory for the 89th straight month. The Institute for Supply Management reported on Monday that its PMI for the US services sector dropped to 56.9 in May from the prior month's 57.5, whereas analysts anticipated a slighter decrease to 57.1 points during the reported month. The ISM said that 17 non-manufacturing industries reported growth last month. The New Orders Index fell to 57,7 from April's 63.2, whereas the Prices Index declined to 49.2 in May from 57.6, marking the first drop in 13 months.
Meanwhile, the Employment Index surged to 57.8 from the preceding month's 51.4, surprising markets after the weak NFP Report released last week. Analysts said that growth in the non-manufacturing sector remained solid despite May's drop, as the growth rate and the Employment Index remained high. Moreover, 15 industries reported employment growth, while just one posted an employment fall. The following employment figures suggested that weak slow job creation in the private sector would be temporary.
No important US data, Japanese GDP eyed
Today from the US side the Consumer Credit will be released. It is an amount of money that individuals borrowed. It shows if consumers can afford large expenses, which can fuel economic growth. However, a high figure may also indicate that the economy is overheating, as consumers borrow in order to live beyond their means. From the Japanese side the Final GDP is due. It is the monetary value of all the goods, services and structures produced in Japan within a given period of time. GDP is a growth measure of market activity because it indicates the pace at which the Japanese economy is growing or decreasing. The Japanese Current Account is also due. It is a net flow of current transactions, including goods, services and interest payments into and out of Japan. A current account surplus indicates that the flow of capital into Japan exceeds the capital reduction. A current account deficit indicates that there is a net capital outflow from these sources.
USD/JPY struggles to hold above 109.00
The USD/JPY pair behaved in accordance with expectations yesterday, being that the monthly S1 at 109.22 was the level that managed to prevent the pair from edging lower. Although the monthly S1 managed to limit the losses on Tuesday, risks remain skewed to the downside, meaning that the given demand level could fail today. A breach of this support would open the door for a drop beyond 109.00, with the second closest strong support being only under 108.00. Technical studies do suggest the bearish momentum is to prevail today, but given the latest USD movements, a positive development would not be a surprise. The recovery, however, would just be a bullish correction from the recent declines and could well take place if the given trend-lines prove to be viable.Hourly chart
On the daily chart the USD/JPY is seen breaching the three-month support line, which suggests that more weakness is likely to follow. The monthly S1 could still cause a temporary recovery, with the exchange rate even climbing back towards 112.00, but the bearish trend would still remain intact. Eventually, this would still lead towards the Buck weakening against the Yen.
Daily chart
Traders' sentiment remains neutral, with 52% of all open positions are long and the other 48% are short. Meanwhile, there are 54% of all pending orders set to purchase the Greenback.
At the moment, 61% of OANDA clients are long the US Dollar against the Yen, while the remaining 39% are short. In addition, Saxo Bank clients' sentiment slightly improved over the weekend, as 62% of their open positions are now long.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish on the Dollar
According to the poll that gathered forecasts between May 07 and June 07, traders expect the US Dollar to appreciate to 112.61 yen in three months' time, while the forecast for March 31 was 117.66 yen. It is also worth noticing that 67% of all forecasts fall above 111 yen, which is above the current spot price. The majority of people who voted expect the US Dollar to cost somewhere either between 112.50 and 114.00 or between 115.50-117.00 yen in three months, with 18% of survey participants choosing each of these trading ranges. Furthermore, the 114.00-115.50 range was the second most popular one, with 15% of the voters choosing it.