- The share of buy orders slid from 62 to 49%
- 71% of all open positions are long
- Resistance is at 113.47
- Immediate support is around 113.26, namely the 20-day SMA
- 58% of the survey participants expect the US Dollar to cost less than 117 yen in three months
- Upcoming events: US NFIB Small Business Conditions, Japanese Preliminary Machine Tool Orders, US Crude Oil Inventories, US Wholesale Inventories
With another day of disappointing data and Friday's wage figures continuing to weigh on the US currency, losses were seen all over the market. The Greenback lost the most against its Australian counterpart (0.37%), followed by 0.27%, 0.26% and 0.25% declines against the Sterling, the Loonie and the Yen, respectively. However, the Buck managed to post some gains against the Swiss Franc, adding 0.28%, and the New Zealand currency, appreciating 0.23%. The Buck also remained relatively unchanged against the European single currency, adding only 0.07% over the day.
Japan's economy slowed less than initially thought in the last quarter of 2015, though the country remains on the brick of falling into another recession despite Prime Minister Shinzo Abe's attempts to underpin growth. Revised data for gross domestic product showed the world's third biggest economy shrank at an annualized pace of 1.1% in the December quarter from the previous three-month period, compared with the initial estimate of a 1.4% contraction. Private consumption was the main drag on Japan's economy in the reported period, dropping a revised 3.4% on an annualized basis, from an originally estimated 3.3%. However, growth in business investment was revised up to an annualized gain of 6.3%, compared with the 5.7% increase initially reported. For the whole of 2015, the Japanese economy came to a revised 0.5% from an initially estimated 0.4%.
The moribund economic backdrop will keep the Bank of Japan under pressure to further expand monetary stimulus. However, policy makers may refrain from bold measures when they meet next week for a rate review, after introducing negative interest rates in January. Moreover, weak growth could boost market speculation that Abe may postpone a second consumption tax hike to 8% from 8% scheduled in April next year.
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.
Another quiet day
There are no significant events to influence the USD/JPY currency pair later today, except for the NIFB Small Business Index. However, this event is unlikely to have a serious impact on Dollar pairs. Tomorrow, however, the US Crude Oil Inventories could somewhat influence the American currency. The EIA Crude Oil stockpiles report is a weekly measure of the change in the number of barrels in stock of crude oil and its derivates, and it's released by the Energy Information Administration. This report tends to generate large price volatility, as oil prices impact on worldwide economies, affecting the most, commodity related currencies such as the Canadian dollar. Despite it has a limited impact among currencies, this report tends to affect the price of oil itself, and, therefore, had a more notorious impact on WTI crude futures.USD/JPY journeys below 113.00
Once again the Greenback made a U-turn after having edged closer towards the 114.00 level, resulting in a 50-pip slump over the day. The nearest support, however, played its part and succeeded in stopping the USD/JPY from falling deeper. Today the US Dollar is likely to retain its post wage data weakness, allowing the Yen to take the upper hand and benefit from its safe haven status. The 20-day SMA is supporting the pair around 113.27, but according to technical indicators the Buck could drop beyond the 113.00 mark and even reach the second support area around 112.20, represented by the weekly S1 and the Bollinger band.Daily chart
The USD/JPY currency pair continued slumping on Monday and, as a result, breached the ascending channel's support line, breaking the pattern completely. Although the 200-hour SMA managed to keep the pair from falling deeper yesterday, it failed to provide sufficient support today. Now the Greenback is poised for more weakness and could fall the way down to 111.00.
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 59% of open positions are long, compared to 63% on Monday, and the Danish bank reports that 58% of its clients' positions are long, compared to 59% previously.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 117 yen
The majority of the survey participants (58%) expect the US Dollar to cost less than 117.00 yen in three months. The most popular choice, however, is the 120.00-121.50 price intervals, selected by 20% of the voters. According to the votes collected between Feb 08 and March 08, the mean forecast for June 08 is 115.18. At the same time, 17% of the surveyed believe the Greenback could fall in the 111.00-112.50 price interval after a three month period.