- The portion of buy orders surged from 66 to 79%
- 73% of traders retain a positive outlook towards the USD
- Resistance is around 113.40
- Immediate support is at 112.39, namely the weekly S1
- 51% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events: US Import Prices, BoJ Monetary Policy Statement, US Retail and Core Retail Sales, US PPI
This time the US Dollar's performance was not formidable as before, with the Buck declining against most major peers on Thursday. The largest loss was registered against the Euro, 1.61%, which rebounded after Draghi's statement later that day. Another notable decline of 1.23% was seen against the Swiss Franc, while the Greenback dropped only 0.44% versus the Sterling, 0.21% against the Kiwi and 0.14% versus the Yen. Gains, on the other hand, were seen against the remaining commodity currencies, namely the Loonie and the Aussie, against which the US currency added 0.74% and 0.42%, respectively.
The number of Americans applying for unemployment benefits dropped more than expected last week, reaching the lowest level since October, signalling sustained improvement in the labour market. Jobless claims are being scrutinized for signs of labour market weakness following a recent massive stock market sell-off that resulted in a tightening in financial market conditions amid faltering global growth and concerns the world's number one economy was heading into recession. Initial claims for unemployment benefits dropped 18,000 to a seasonally adjusted 259,000 for the week ended March 5, the lowest level since mid-October, according to the Labor Department. Claims have now been below the 300,000 threshold, which is associated with healthy labour market conditions, for a year, the longest such stretch since the early 1970s. The four-week moving average of claims, considered a better measure of labour market developments as it strips out week-to-week volatility, declined 2,500 to 267,500 last week, the lowest level since late October.
So far, the labour market remains on strong footing, with nonfarm payrolls surging by 242,000 jobs in February and the unemployment rate holding at an eight-year low of 4.9%.
Vatsal Srivastava, director at the Blackwater Consulting, explains why the US Dollar is a advancing against the Yen this week. Even though he says that there was nothing fundamentally driving USD/JPY on Monday, one of the key drivers is the falling oil prices, which is actually boosting the Yen, in his opinion, as there is an addition cause for more QQE. Vatsal Srivastava also mentions that "it is going to be a hard economic ride ahead and there seems to be no light on the horizon for Japan as of now". "Lets hope for the best," he added.
US Import Price Index
There is only one event that could influence the USD/JPY pair's performance today – the US Import Price Index. The Import Price Index is released by the US Department of Labor, which informs the changes in the price of imported products into the US. The higher the cost of imported goods, the stronger the effect they will have on inflation, redunding in a higher probability of a rate rise. No further events will be due until Tuesday next week, where the BoJ Monetary Policy Statement and the US Retail Sales data will be due.USD/JPY takes advantage of risk-on sentiment
The American Dollar weakened against the safe haven Yen on Thursday, retreating from its one-week high, amid the sudden return of risk aversion, caused by ECB Draghi's statement. However, risk sentiment improved today and is likely to push the Buck higher towards 114.00. On the other hand, the USD/JPY struggled to pierce the immediate resistance cluster, represented by the 20-day SMA and the weekly PP, this week, which might contribute to not only limiting the gains at 113.50, but even to an intraday decline. In this case, the weekly S1 at 112.39 is expected to prevent the pair from edging lower, while daily technical studies are unable to confirm either scenario.Daily chart
The USD/JPY currency pair appears to be in a bullish trend, even though a consolidation period also seems likely. Any downside movement is likely to be limited by the support line around 112.70, while a breach even towards 112.30 is possible, which would indicate that the consolidation trend took the upper hand.
Hourly chart
SWFX sentiment stays bullish
Traders at OANDA and Saxo Bank have a diametrically opposite view of the pair's future. Clients of both brokers are mostly bullish. Canadian-based foreign exchange company reports that 65% of open positions are long, compared to 62% on Thursday, and the Danish bank reports that 58% of its clients' positions are long (57% previously).
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to rise above 114 yen
The majority of the survey participants (51%) expect the US Dollar to cost more than 114.00 yen in three months. The most popular choice implies that the Greenback is to rise above 120.00 yen in three months, selected by 17% of the voters. According to the votes collected between Feb 11 and March 11, the mean forecast for June 11 is 114.33. At the same time, 14% of the surveyed believe the Greenback could fall in the 111.00-112.50 price interval after a three month period.
This week's overall sentiment for the USD/JPY pair again is bullish, as 70.6% of all traders are supporting the positive case for the pair, while more than 22% of traders expect the pair to close above the 113.8 level towards the end of present working week.
Among the traders with a positive outlook towards the USD/JPY currency pair, Besim76 believes that traders moved away from safe havens, amid poor fundamental data from Japan. As a result, the US Dollar could end the week higher against the Yen again.
At the same time, megajorko has a negative perspective. He said that "the yen has performed weaker than all major currencies, but there were very strong bulls in the yen, so I suppose the bearish power to continue after this week's correction."