- The share of buy orders slid from 56 to 54%
- 61% of traders are long the Buck
- Immediate resistance lies around 114.60
- The closest support rests around 113.30
- Upcoming events: US Trade Balance, US Consumer Credit, Japanese Final GDP, Japanese Current Account
Economic activity in the US services sector rose unexpectedly last month, official figures showed on Friday. The Institute for Supply Management reported its Purchasing Managers' Index for the services sector climbed to 57.6 in February, while market analysts expected the Index remain unchanged from the prior month's reading of 56.5 during the reported period. Any reading above the 50-point level indicates activity expansion in the services sector. Furthermore, the Non-Manufacturing Business Activity Index came in at 63.6, the highest level since February 2011, up from the previous month's 60.3. Data also showed the New Orders Index increased to 61.2, the highest since August 2015, following January's 58.6. The ISM said 16 out of 18 industries reported growth last month, adding that the share of companies expressing a positive outlook for the future rose markedly last month despite the existing uncertainty in the US economy. Economic activity contracted in the information industry and the real estate, rental and leasing industry in February.
After the release, the US Dollar hit its intraday high of 114.54 against the Japanese Yen but failed to maintain its gains as investors awaited a speech by the Fed Chair Janet Yellen in the day.
US Trade Balance and Consumer Credit versus Japanese Final GDP and Current Account
Today focus should be on the Trade Balance. It is a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the USD. If a steady demand in exchange for US exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the USD. Another event will be the US Consumer Credit. 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 data is due. It shows the monetary value of all the goods, services and structures produced in Japan within a given period of time. GDP is a gross measure of market activity because it indicates the pace at which the Japanese economy is growing or decreasing. The Japanese Current Account data is also worth paying attention to, as 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 flow of capital into Japan exceeds the capital reduction, while a deficit indicates that there is a net capital outflow from these sources.USD/JPY to remain under 114.00
The USD/JPY currency pair remained almost completely flat on Monday, unable to reclaim the 114.00 major level. The pair remains on the back foot, with the cluster around 113.30 representing the lower boundary of today's intraday trade and the cluster circa 114.60—the upper border. The Buck is expected to remain within this trading range, but with risks skewed to the downside, as the exchange rate recently jumped away from the ascending channel's upper boundary. Ultimately, a retest of the 112.30/00 area is expected, which would reconfirm the channel's support line. Technical studies, however, are unable to confirm either the positive or the negative scenario.Daily chart
Even though on the daily chart the USD/JPY pair is seen trading in an ascending channel pattern, on the hourly chart the Buck is under a down-trend. However, this could only support the outlook, as it might indicate that the bearish trend-line is to keep weighing on the pair and force it move lower until it reaches the ascending channel's support line on the daily chart.
Hourly chart
Today 61% of traders are long the Buck (previously 59%), while the share of buy orders slid from 56 to 54% during the last 24 hours.
Right now 51% of OANDA clients are bulls, compared to 64% on Monday. 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 07 and March 07, traders expect the US Dollar to appreciate to 114.22 yen in three months' time, while the forecast for March 31 was 117.66 yen. It is also worth noticing that 58% 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 114.00 and 115.50 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 106.50-108.00, with 15% of survey participants choosing it.