- The share of sell orders edged up from 45 to 75%
- 53% of all open positions are short
- The nearest resistance is around 111.40
- Immediate support rests at 110.76
- Upcoming events: US ADP Non-Farm Employment Change, US Initial Jobless Claims, US Manufacturing PMI, US Non-Farm Productivity Index, US Construction Spending
The mood of American shoppers deteriorated for the second consecutive month in May. The Conference Board reported on Tuesday that its Consumer Confidence Index dropped to 117.9 points in the reported month, falling behind expectations for 120.1 points. Apart from that, April's reading was revised down to 119.4 from initially reported 120.3 points. The share of consumers saying business conditions were "good" fell to 29.4% from 30.8% in April, whereas the share of those saying business conditions were "bad" remained unchanged at 13.7% in May. The share of shoppers expecting business conditions to improve over the next six months fell to 21.3% from 25.1% in April, whereas the share of those expecting more jobs to be created over the same period of time declined to 18.6% in May from 21.9% in the preceding month.
Meanwhile, 29.9% of the respondents stated that there were plentiful jobs, compared to 30.3% in April. Earlier in the day, the Commerce Department reported that consumer spending climbed 0.4% last month, the largest gain since December. Overall, US consumers maintained the positive outlook for the economy.
US Manufacturing PMI and ADP Employment Change
Today traders can focus on the US Manufacturing PMI, as it captures business conditions in the manufacturing sector, which in turn dominates a large part of total GDP and, thus, is an important indicator of business condition and the overall economic condition in the US. It is also released by both Markit Economics and the Institute for Supply Management. However, a more important event will be the 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. Additionally, some attention could be paid to the US Construction Spending, as it is an indicator that measures the total amount of spending in the US on all types of construction. The residential construction component is useful for predicting future national new home sales and mortgage origination volume.
USD/JPY: no significant changes expected
The USD/JPY pair's behavior fell in line with expectations yesterday, as the exchange rate remained relatively unchanged and no level of significance was pierced. Technically, the Greenback should rebound today, with the weekly S1 providing the required bullish momentum, but with the immediate resistance, namely thee 55-day SMA and the weekly PP, still remaining intact. On the other hand, technical indicators suggest the given pair is to decline today, which would make it the fifth consecutive drop. Poor ADP figures today could be the catalyst for a possible loss, however, it should not exceed 50 pips.Daily chart
The USD/JPY pair kept retesting the three-week down-trend and finally managed to breach it to the upside earlier today. However, the 200-hour SMA is still a solid obstacle, as it kept the pair at bay for quite some time and is expected to do so again. It also coincides with a tough resistance area on the daily chart, bolstering the outlook of the 111:40 area remaining intact.
Hourly chart
There are 53% of traders holding short positions today, compared to 57% on Wednesday. At the same time, the share of sell orders edged significantly higher, namely from 45 to 70%.
At the moment, 56% of OANDA clients are long the US Dollar against the Yen, while the remaining 44% are short. In addition, Saxo Bank clients' sentiment remained unchanged over the day, as 61% of their open positions are still long.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish on the Dollar
According to the poll that gathered forecasts between May 01 and June 01, traders expect the US Dollar to appreciate to 112.64 yen in three months' time, while the forecast for March 31 was 117.66 yen. It is also worth noticing that 65% 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 between 115.50 and 117.00 yen in three months, with 19% of survey participants choosing this trading range. Furthermore, the 112.50-114.00 range was the second most popular one, with 17% of the voters choosing it.