- SWFX market sentiment is 58% bearish (-2%)
- 65% of pending orders in the 100-pip range are to SELL
- Significant resistance is found near 112.60
- Upcoming events: US CB Leading Index m/m, Japan's All Industries Activity m/m
The Commerce Department said that the US homebuilding rose to the highest level of the year in October, where housing starts jumped 13.7% to a seasonally adjusted yearly rate of 1.29M units, while building permits added 5.9% to a 1.30M unit rate in October.
Strong figures were expected to contribute to stronger economic expansion in the US over the course of the Q4.
No significant events in this session
The economic calendar for Monday includes only fundamental events of minor or intermediate importance. The US Conference Board Inc. is going to release its Leading Index for the month of October at 1500GMT.
In addition, Japan is to publish data on all industrial activity for September at 0430GMT early on Tuesday. The impact of the latter, however, tends to be muted, as the overall trend has already been covered in the Tertiary Industry Activity report released about a week earlier.
USD/JPY slips to monthly S1 at 112.04
Contrary to trade patterns theory, the currency rate did not make a breakout from the falling wedge formation to the north. Moreover, the safe haven Yen was quoted higher despite release of disappointing trade data. For this reason, the fall of the rate was most likely based on worries about vote for the new tax reform and Merkel's failure to form a new government.On the one hand, the fact that the monthly S1 located at the 112.04 level sustained under such heavy pressure indicates on an upcoming recovery of the buck, which will tend to reach the 112.62 mark. This scenario is partially supported by the aggregate market sentiment, which is 59% bullish.
On the other hand, the falling moving averages are likely to continue pushing the pair to the bottom in the nearest future.
Hourly chart
USD/JPY was driven by strong downside momentum on Friday which resulted in a 96-pip plunge within one session. The same bearish sentiment was dominating the market on Monday morning, as well. However, given that the pair faces a major support of the 100- and 200-day SMAs circa 111.75, losses should be limited.
Meanwhile, the nearest support is the 55-day SMA. The pair is trading at the lower Bollinger band. Thus, the base scenario for this week favours a rebound from the 111.75 area and a minor correction north.
Daily chart
The bearish SWFX sentiment has diminished in this session, as 58% of traders are holding short positions (-1%). In addition, 52% of pending orders are to sell the US Dollar (+1%).
The bullish market sentiment has taken the upper hand for OANDA traders, as 52% of open positions are now long on Monday. In addition, the number of open positions of Saxo Bank clients is 55% long (+2%).