- The portion of buy orders remains unchanged at 51%
- 73% of all open positions are long
- The nearest support is around 111.70, namely the monthly S3 and the weekly S1
- Major supply area is seen at 113.24 yen
- 58% of the survey participants expect the US Dollar to cost less than 120 yen in three months
- Upcoming events: US Preliminary GDP, US Core PCE Price Index, US Goods Trade Balance, US Personal Spending and Income, US Revised UoM Consumer Sentiment, FOMC Members Brainard and Powell Speeches
Despite strong readings of the US Durable and Core Durable Goods Orders, the Buck failed to post significant gains against most of other major peers. The only gains of 0.73% and 0.16% were registered against the Yen and the Swiss Franc, while the US Dollar lost the most against commodity-based currencies. The USD/Cad dropped 1.26% lower, while the NZD/USD and the AUD/USD climbed 0.94% and 0.55% higher, respectively. The Cable experienced a minor rally of 0.26% on UK's GDP data falling in line with expectations, but the EUR/USD remained relatively unchanged over the day, edging only 0.04% higher, despite Brexit fears weighing on the Eurozone.
US orders for long-lasting goods advanced by the most in 10 months as demand surged across the board. According to the Commerce Department, orders for durable goods, surged 4.9% in January, after December's revised 4.6% drop. Non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending plans, soared 3.9% after plunging by a revised 3.7% in December. The durable goods report was the latest sign that the worst of the manufacturing downturn was likely to be over. Manufacturing production increased solidly last month and factory payrolls that month rose by the most since August 2013. The sector, which makes up 12% of the US economy, is hurt by a strong Dollar, moribund global demand and capital spending cuts by oilfield service firms. Yet core orders are nearly 3% lower now compared with a year ago, reflecting a slowdown in business investment that was a negative contributor to the economy in the second half of 2015.
A separate report showed the number of Americans applying for unemployment benefits increased last week, but remained below levels associated with a tightening labour market. Initial claims for state unemployment benefits surged 10,000 to a seasonally adjusted 272,000 for the week ended February 20, the Labor Department reported.
Vatsal Srivastava, director at the Blackwater Consulting, explains why the US Dollar is a advancing against the Yen this week. Even though he says that there was nothing fundamentally driving USD/JPY on Monday, one of the key drivers is the falling oil prices, which is actually boosting the Yen, in his opinion, as there is an addition cause for more QQE. Vatsal Srivastava also mentions 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 added.
US Preliminary GDP to set the mood today
After Japanese CPI figures already released, it is time to pay attention to the US data, namely the US GDP, the Goods Trade Balance, Personal Spending and etc. The most important event is the GDP release; the Gross Domestic Product Annualized is released by the US Bureau of Economic Analysis and shows the monetary value of all the goods, services and structures produced within a country in a given period of time. GDP Annualized is a gross measure of market activity because it indicates the pace at which a country's economy is growing or decreasing. GDP growth is forecasted to slow down, thus, a weaker-than-expected figure could weaken the Greenback dramatically. However, in other fundamentals improvements are anticipated, nullifying a possible negative reaction of the GDP figures.USD/JPY in tight range between 112.00 and 113.00
The American Dollar succeeded in outperforming the Yen yesterday, amid strong readings of US fundamental data. Even though the day ended with a USD/JPY rally, none significant level was breached. Through all of the week the pair maintained trade between the cluster at 117.70 providing support and the weekly PP at 113.24 acting as a resistance. With technical studies retaining distinctly bearish signals, the Greenback is expected to decline and remain within the borders of the mentioned levels. However, a positive surprise in fundamentals could trigger a rally towards 114.00.Daily chart
Strong US fundamentals helped the USD/JPY currency pair to break out of the descending channel to the upside, but the 200-hour SMA provided support and limited the gains. This level keeps weighing on the pair today and could even cause the exchange rate to retreat back to 112.00 – the level where the Buck found sufficient demand to pierce the channel's upper border.
Hourly chart
SWFX sentiment stays bullish
Traders at OANDA and Saxo Bank have a diametrically opposite view of the pair's future. Clients of both brokers are mostly bullish. Canadian-based foreign exchange company reports that 65% of open positions are long (previously 66%), and the Danish bank reports that 59% of its clients' positions are long, compared to 56% previously.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 120 yen
The majority of the survey participants (58%) expect the US Dollar to cost less than 120.00 yen in three months. The most popular choice is the 120.00-121.50 price intervals, selected by 19% of the voters; however, according to the votes collected between Jan 26 and Feb 26, the mean forecast for May 26 is 117.65. At the same time, 15% of the surveyed believe the Greenback could fall in the 111.00-112.50 price interval after a three month period.
This week, traders are expecting pure negative development of the pair, opening short position more often than long ones. Market sentiment is strongly bearish at 91%, while a drop down to 110.00 yen is expected.
Among those few who still believe the USD/JPY could edge higher by the end of this week, saso suggests that the pair has been falling on a risk off sentiment and that this situation might change in favour of the Buck.
In the larger part of 91% of traders who expect the US Dollar to weaken against the Japanese currency, Likerty stated that "I still consider another plunge of the pair" to back his view.