- Number of orders to acquire the Greenback is in a majority, taking up 62% of all the commands.
- Market sentiment among SWFX traders remains positive, with 59% of positions being long
- 22% of traders see USD/JPY above 124.5 by mid-May
- The nearest support is represented by the weekly PP, while the closest resistance shifted upwards to the weekly R1 at 119.50
- Upcoming events: US Annualized GDP, US Core Personal Consumption, US Pending Home Sales, Chicago Purchasing Manager's Index
Welcome to the club! The annual inflation rate in the world's number one economy turned negative in January for the first time since 2009. The Labor Department reported that consumer price index dropped 0.1% in the reported month from a year earlier. However, core inflation, which strips out energy and food costs, stayed positive at 1.6% on an annual basis, but below the Fed's 2% goal. Deflation was not the only negative piece of news, as the number of Americans who applied for unemployment benefits in the week ending February 20, rose more than expected, pushing the reading back above 300,000. The Labor Department said weekly applications jumped 31,000 to a seasonally adjusted 313,000, the highest in six weeks. The four-week average, a less volatile measure, increased 11,500 to 294,500. Meanwhile, continuing claims for the week ending February 7 came in at 2.401 million, compared to the preceding week's revised reading of 2.422 million.
US durable goods were the only positive data among the plethora of Thursday's fundamentals. Demand for big-ticket manufactured goods rebounded in January, for the first time in three years. Bookings for goods meant to last at least three years advanced 2.8% following a revised 3.7% drop in the preceding month, the Commerce Department reported. Excluding the volatile transportation sector, orders ticked up 0.3%.
Steve Lucas, technical analyst from 3C Analysis, said: "I am not sure where the Bank of Japan will be comfortable with USD/JPY. I think it is kind of neutral weakness or strength in the Yen for direct exporters and importers. When we spoke in July, USD/JPY was at 100, and it is now at 120, so we have had a 20% weakness in the Yen, so is another 20% possible or 15% possible? Would it happen in 12 months? Possibly, it could, why couldn't it?"US Preliminary GDP decline anticipated
Today the US Preliminary GDP growth is expected to weaken to 2.1%. However, the Pending Home Sales change is predicted to improve from the negative zone to 2.5%.
USD/JPY re-tested weekly R1
Steve Lucas mentions "the fact that numbers coming out of the US continue to be good, compared to everyone else in the world, so all the facts being in place I don't see any reason why the Dollar can't continue to go stronger, and I understand why the market is stalled here, there are some very-very key levels, so I do have a bit of caution in my Dollar call and I do want to see that 121 area broken."
As expected, USD/JPY failed to slump yesterday. Moreover, the pair rallied and met the weekly R1, before settling at a two-week high of 119.41. According to the technical studies, the Greenback is likely to experience losses on the four-hour time frame; however, by the end of today's trading session an additional surge is expected. The Buck might encounter resistance around 119.50, unless the US data to be released today are better than expected.
Daily chart
Looking closer at the USD/JPY pair on the hourly chart, the cross was seen testing the daily PP several times before finally breaching it. Although, the slump did not last long, and the Greenback appreciated to the same level we observed at the beginning of the day. As mentioned before, technical indicators still suggest that the Buck will preserve its bullish momentum later today.
Hourly chart
Third day bullish sentiment
For a third consecutive day the market sentiment among SWFX traders remains positive, with 59% of positions being long. Meanwhile, the number of orders to acquire the Greenback is in a majority as well, taking up 62% of all the commands.
Although not as strong as yesterday, but OANDA traders' sentiment remains bullish with respect to the US Dollar, longs account for 59% of the market. Meanwhile, the attitude of the SAXO Bank traders weakened, as 53% of open positions are short and the remaining 47% are long.
Spreads (avg, pip) / Trading volume / Volatility
22% of traders see USD/JPY above 124.5 by mid-May
Compared to the previous week, sentiment became completely equal on USD/JPY cross with both long and short expectations divided 50/50 between traders. The average forecast for the pair is currently around the 119 level.
Rokasltu this time is on the bullish side, as he said: "USD/JPY pair has been recently attacking 120 mark, taking it and retreating later. I think that such a scenario might be repeated this week again, thus rate at the end of the week might be lower than 120." Meanwhile, llolor is expecting strong data out of Japan and no signs of further QE. Therefore, he suggests bearish developments.