- 51% of all pending orders are to sell the Buck
- 53% of all open positions are short
- Immediate resistance lies at 112.34
- The closest support rests at 111.83
- Upcoming events: US ADP Non-Farm Employment Change, US Services PMI, FOMC Statement, US Federal Funds Rate, US Crude Oil Inventories
The US economy expanded at its weakest pace since the Q1 of 2014 in the three-month period to March, as consumer spending barely rose; however, a rise in business investment and improving pay growth held out hopes that the economy would regain momentum in the upcoming quarters. The Department of Commerce reported on Friday that the economy grew at a 0.7% annual pace in the Q1, following the preceding quarter's 2.1% and falling behind expectations for a 1.3% climb. The March quarter growth raised doubts over the Trump administration's ability to boost GDP growth and deliver economic reforms. Consumer spending, the largest contributor to US economic growth, advanced just 0.3%, the weakest since 2009. The Q1 economic slowdown was partially driven by the unusually warm weather, high volatility in inventories and the strong US Dollar. However, Friday's data showed a pickup in both wage and business investment growth.
Therefore, analysts suggest that economic growth will likely rebound in the upcoming months. Moreover, the report showed a jump in inflation that would probably please the Federal Reserve and force it to raise rates at a quicker than expected pace. The next interest rate hike is largely expected to come in June.
US ADP Non-Farm Employment Change and FOMC Statement
Today focus is on the US fundamentals, such as the US ADP Non-Farm Employment Change. It is a measure of the change in the number of employed people in the US. A rise in this indicator has positive implications for consumer spending, stimulating economic growth. The Federal Funds Rate decision is unlikely to have any impact, as no rate increase is expected until June, but the tone of the FOMC Statement could have either positive or negative effect on the US Dollar. The US Services PMI might also have some impact, as it captures business conditions in the services sector. As the services sector dominates a large part of total GDP, the Services PMI is an important indicator of the overall economic condition in the US.
USD/JPY attempts to reach 113.00
Despite having appreciated against the Japanese Yen yesterday, the US Dollar still retreated from its intraday high, as it lacked momentum to pierce the second resistance level. Nevertheless, the USD/JPY pair has the opportunity to pierce this supply level today, with the 112.95 level expected to be the intraday high, as it marks the descending channel's upper border. The given trend-line is also reinforced by the upper Bollinger band and the monthly R1, while technical indicators are now giving bullish signals in the daily timeframe. The base case scenario, however, is a close around 112.60.Daily chart
As expected, the USD/JPY continues to edge higher, paving its way towards the descending channel's resistance line. The given area, around 113.00, could easily be reached today, which would then spark bearish momentum and cause the Buck to retreat towards 111.00, with the main driver being Friday's NFP data.
Hourly chart
Market sentiment is relatively neutral, as 53% of all open positions are short and the remaining 47% are long. At the same time, the number of orders to buy the Buck plunged from 69 to 49%.
Right now 57% of OANDA clients are bulls, unchanged since Tuesday, the bullish sentiment has been holding around the same level for some time now. In the meantime, Saxo Bank clients barely manage to retain a positive outlook towards the US Dollar, being that 51% of their open positions are now long and the remaining 49% are short.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish on the Dollar
According to the poll that gathered forecasts between April 03 and May 03, traders expect the US Dollar to appreciate to 110.72 yen in three months' time, while the forecast for March 31 was 117.66 yen. It is also worth noticing that 52% of all forecasts fall under 111 yen, which is still above the current spot price. The majority of people voted expect the US Dollar to cost somewhere between 112.50 and 114.00 yen in three months, with 16% of the survey participants choosing this trading range. At the same time, the second most popular interval was the 108.00-109.50 one, with 15% of survey participants it.