- Orders to buy the Buck are in a majority with 59% of the market
- There are more bulls than bears among SWFX traders, 63% and 37%, respectively
- 23% of traders see USD/JPY above 124.5 by mid-May
- Upcoming events: US Markit Services PMI, US Consumer Confidence, Fed's Yellen Testimony, US New Home Sales Change
Sales of previously owned homes in the US declined sharply in January to the lowest level since April last year, reflecting a shortage of properties on the housing market and rising prices that could potentially constrain the market this year. Existing home sales dropped 4.9% in January from the preceding month to a seasonally adjusted annual rate of 4.82 million, according to the National Association of Realtors. The fall in sales, which appeared to be broad-based, came despite the 30-year mortgage rate sliding to the lowest level in 20 months. Tight supplies are undermining sales by limiting the choice of houses available to potential buyers, and keeping house prices elevated, putting off first-time buyers
However, a tightening labour market would boost strong wage growth and attract first-time buyers to the market. Yet, unless there is a significant increase in the number of homes available for sale, the housing recovery could remain dull. The housing market has so far lagged the overall economic recovery. Home sales rose 3.2% from the previous year.
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?"Yellen's testimony may provide insight on rate path
Today the US Markit Services PMI figure and the US Consumer Confidence are expected to be weaker than their previous values. Nonetheless, the main risk event is the testimony of Janet Yellen before the Senate Banking Committee, as the market is anticipating a rate hike this year in light of improving labour market conditions.
USD/JPY started the week with a plunge
Steve Lucas also mentioned: "Also 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."
On Monday, the USD/JPY currency pair slumped, piercing the weekly pivot point. However, the 55-day SMA appears to have stopped further decline, proving to be a considerably strong support. Technical studies suggest that the Greenback is likely to rebound versus the Yen and maintain the bullish momentum for the whole week. The closest resistance in face of the weekly R1 is rather weak, so the Buck is likely to meet resistance at a cluster of important levels around 120.10.
Daily chart
On the hourly chart we see the US Dollar rising versus the Yen since before midnight. So far the Greenback has gained over 50 pips and reached a one-week high at 119.31. Technical indicators in every time frame are strongly bullish, meaning that the pair is likely to continue rallying at least up to the weekly R1, which might cause the cross to bounce back.
Hourly chart
Bulls prevail among traders
The bullish side of the SWFX marketplace has gained three percentage points during the last 24 hours, and it is now at 63%. Although not as high as yesterday, but the number of orders to acquire the US Dollar remains bullish at 59%.
OANDA traders are also optimistic with respect to the Greenback, since 60% of open positions are long. In the meantime, the attitude of the SAXO Bank traders flipped to the downside, being that 55% of open positions are short and the remaining 45% are long.