- The number of purchase orders inched up from 57 to 67%
- 53% of all open positions are long
- Immediate resistance lies at 111.91
- The closest support rests at 110.97
- Upcoming events: US Core PCE Price Index, US Personal Spending & Income, US Manufacturing PMI
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 GDP and Employment Cost Index
This Monday is a rare one, as there are some fundamentals to focus on. Usually, not many economic data releases are scheduled for Mondays, but today attention could be paid to the USD Personal Spending and Income. The Personal Income measures the total income received by individuals from all sources, including wages and salaries, interest, dividends, rent, transfer payments. This figure can provide insight on the US employment situation. As for the Personal Spending, it measures purchases of goods and services by households and non-profit institutions that serve households from private business. Another relatively important data release will be the US Core PCE Price Index. It is an average amount of money that consumers spend in a month. "Core" excludes seasonally volatile products, such as food and energy, in order to capture an accurate calculation of the expenditure. It is a significant indicator of inflation. Finally, the most important data release today – the US Manufacturing PMI. It is released by both Markit Economics and the Institute for Supply Management, and captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the Manufacturing PMI is an important indicator of business conditions and the overall economic condition in the US.
USD/JPY attempts to pierce 55-day SMA
In spite of a an extremely weak US GDP reading on Friday, the US Dollar managed to outperform the Japanese Yen, adding 27 pips. The Buck managed to retain its strength over the weekend, eager to take another shot at climbing over the 55-day SMA. The given SMA represents immediate resistance, which is considered to be the only solid obstacle on the path towards the descending channel's resistance line. The Greenback appears to be lacking impetus to breach the 55-day SMA at the moment, therefore, a close at 111.60 or lower remains highly possible, especially since technical indicators keep giving mixed signals and the RSI specifically is close to the turnaround point.Daily chart
The Greenback kept consolidation against the Yen since it touched the broadening rising wedge's resistance line on April 26. Technically, the exchange rate should edge lower relatively sharp this week, with the mood ahead of the US NFP data acting as a catalyst. Consequently, the wedge's lower boundary is expected to be reconfirmed.
Hourly chart
Today 53% of all open positions are long, compared to 51% on Friday. Meanwhile, the number of purchase orders inched up from 57 to 67%.
Right now 58% of OANDA clients are bulls, compared to 55% on Friday, 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 52% of their open positions are now long and the remaining 48% 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 01 and May 01, traders expect the US Dollar to appreciate to 110.86 yen in three months' time, while the forecast for March 31 was 117.66 yen. It is also worth noticing that 53% 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 17% of the survey participants choosing this trading range. At the same time, the second most popular intervals were the 108.00-109.50 and the 115.50-117.00 ones, with 13% of survey participants each of them.