- The number of buy orders edged up, returning to their Thursday's level at 61%
- The bulls lost two percentage points and now account for 56% of all positions
- 22% of traders see USD/JPY above 124.5 by mid-May
- Nearest resistance is located around 120.05, whereas the closest support is represented by the weekly PP
- Upcoming events: US Core CPE Price Index, US Personal Spending and Income, US ISM Manufacturing PMI, JPY Average Cash Earnings, JPY Monetary Base
US economic growth rose more than expected in the fourth quarter, according to the preliminary data. Gross domestic product grew at a 2.2% annual pace, revised down from the 2.6% pace estimated last month, the Commerce Department reported. The economy expanded at a 5% rate in the September quarter. With consumer spending accelerating at its fastest pace since the first quarter of 2006 and strong gains in other measures of domestic demand, the slowdown in growth is seen to be temporary. Growth in consumer spending, which makes up more than two-thirds of US economic output, was revised down to a 4.2% pace in the final quarter, still the quickest since the first quarter of 2006. For 2014 as a whole, US GDP expanded 2.4%, slightly better than the average 2.2% growth of 2010-2013.
Meanwhile, US pending home sales rose to the highest level in more than a year in January, raising hopes that the weak housing recovery may be gaining momentum. According to the National Association of Realtors, the pending home sales index climbed 1.7% last month, reversing a slide in December, which was revised to a 1.5% decline compared with the 3.7% drop reported previously. A separate report showed US consumer sentiment slid from the highest level in 11 years in February due to unexpectedly severe weather. The University of Michigan's final February reading was 95.4, falling from January's 98.1, the highest since January 2004.
Andrew Wilkinson, Chief Market Analyst at Interactive Brokers, said "the Japanese economy probably requires further stimulus from Bank of Japan, I guess the biggest question mark hanging there is: whether or not massive quantitative easing at the BoJ is actually working for the domestic economy?"Japanese data are expected to pressure the Yen
The medium-impact US data are expected to be slightly better than expected, whereas the high-impact release, the ISM Manufacturing PMI, is predicted to worsen. However, tomorrow the Japanese data are expected to deteriorate, as in comparison to the US, suggesting the USD/JPY may surge.
Yet again USD/JPY rallies
Andrew Wilkinson mentioned: "We saw the Yen strengthening to around 117.5. We have seen great weakening or a resumption of that trend of weaker Yen as the weeks went on heading towards 120 vs the dollar. Looks like if the market is getting back into that mode of expecting further stimulus. One would expect the Yen to continue weakening into 120s."
USD/JPY extended its gains for the second day last Friday, but added only 17 pips. Due to the US GDP data release being better than expected, the Greenback managed to breach the weekly R1 level. However, the pair did not surge too high, settling not far from the R1 resistance at 119.57. Moreover, taking into account the technical indicators, which are mostly pointing north-ish, the US Dollar is likely to maintain its bullish momentum through Monday. Closest resistance is still the weekly R1, but this time at 120.06, as the pair opened this week at 119.70.
Daily chart
On the hourly char the pair is seen following an uptrend channel for at least a day now. Judging by the pattern, the Greenback is going to rebound from the daily R1, as it intersects with the lower trendline. As it was mentioned before, technical indicators are emitting bullish signals, bolstering the bullish forecast. Closest resistance for the Buck in the hourly time frame is set around 120.05, represented by the weekly R1 and a Bollinger band.
Hourly chart
Still more bullish traders
The percentage of longs decreased over the weekend. The bulls lost two percentage points and now account for 56% of all positions. At the same time, the number of buy orders edged up, returning to their Thursday's level at 61%.
OANDA traders are as optimistic with respect to the Greenback, since also 56% of open positions are long. In the meantime, the SAXO Bank traders are not as confident, being that 57% of open positions are short and the remaining 43% are long.