- The number of orders to sell the Buck increased from 37 to 63%
- 73% of traders hold long positions
- The weekly R1 at 103.51 represents immediate resistance
- Support is at 102.46
- 54% of the survey participants expect the US Dollar to cost more than 108.00 yen in three months
- Upcoming events: US Factory Orders, FOMC Member Dudley Speech, US Trade Balance, US Services PMI, FOMC Meeting Minutes
Factories across the US reported on a strong jump in production during June, being spurred by a accelerated foreign demand for US goods. According to the Markit release, the purchasing managers' index went up to 51.3 last month, up from 50.7 in May, thus reaching a three-month high. However, it is worth to point out, that the data was revised down slightly from the flash estimate of 51.4. The following numbers show that weakness in the April and May readings confirms that the second-quarter overall was the weakest since the third quarter of 2009, but there are still hopes that sector is stabilising. Moreover, there was a rise in new orders at the strongest pace since March, while export orders, in turn, ticked up at the fastest pace since September 2014.
Overall, a slight softening in the dollar from the record levels being reached late last year and at the beginning of 2016 has helped US firms sell more goods abroad, while stabilization in the price of crude oil has helped factories connected to the energy patch. In the meantime, manufacturing trends will have relatively small impact on Federal Reserve policy decisions, since the Fed is more concerned with the reassurance that the industrial sector is showing signs of stabilisation.
Vatsal Srivastava, director at the Blackwater Consulting, explained why the US Dollar advanced against the Yen last week. He said there was nothing fundamentally driving USD/JPY on Monday, but one of the key drivers was the falling oil prices, which was actually boosting the Yen; in analyst's opinion, as there was an addition cause for more QQE. Vatsal Srivastava also mentioned 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 summed up.
Focus on US Factory Orders ahead of tomorrow's FOMC Minutes
Even though the US Independence Day is over, there are still no substantial market movers today both from US and Japan. Nevertheless, the only relevant event will be the US Factory Orders, which are a measure of the total orders of durable and non-durable goods, such as shipments (sales), inventories, and orders at the manufacturing level, which can offer insight into inflation and growth in the manufacturing sector. A calm before the storm, with the FOMC Meeting Minutes scheduled for Wednesday.USD/JPY on the edge of falling under 102.00
Due to a bank holiday in the US and lack of market movers, the USD/JPY currency pair remained almost completely unchanged yesterday. However, the situation is expected to change today, even though technical indicators keep giving mixed signals in the daily and the weekly timeframes. The risk-off sentiment is also present on the markets, therefore, providing the Yen with a small boost, but sufficient to cause the Greenback to pierce the immediate support, namely the weekly PP at 102.46. Consequently, the pair could put the eight-month support line to the test, which in turn is reinforced by the weekly S1.Daily chart
The Greenback failed to preserve the ascending channel pattern yesterday, as the pressure from the 200-hour SMA was too tough. As a result, the pair pierced the lower trend-line, falling under the risk of eventually sustaining more losses, with the only possible demand area being the 50.0% Fib at 100.72.
Hourly chart
Market sentiment gradually improved over the day, as 73% of traders hold long positions today (previously 52%). At the same time, the number of orders to sell the Buck increased from 37 to 63%.
There is a small but nevertheless bullish bias among OANDA and Saxo Bank traders as well. In case of OANDA, 62% of positions opened by its clients are long. Similarly, 60% of positions opened by Saxo Bank traders are long as well, unchanged since yesterday.
Spreads (avg, pip) / Trading volume / Volatility
Slightly more than a half expect the exchange rate to rise above 108.00 yen
Slightly more than half of the surveyed (54%) now assume that the US Dollar is to cost more than 108.00 yen after three month time. The most popular choice, however, implies that the Greenback is to cost between 108.00 and 109.50 yen in three months, selected by 17% of the voters. According to the votes collected between June 05 and July 05, the mean forecast for Oct 05 is 107.64. At the same time, 15% of the surveyed believe the Greenback could cost between 111.00 and 112.50 in three months.