- The number of purchase orders dropped from 79 to 63%
- 74% of all open positions are long
- Support is around 113.40
- Immediate resistance is at 114.75, namely the Bollinger band, the weekly R1 and the monthly PP
- 50% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events: Japanese Monetary Policy Statement, BoJ Press Conference, US Retail and Core Retail Sales, US PPI and Core PPi, US Empire State Manufacturing Index
Despite a relatively strong reading of the US Import Price Index, the American currency sustained losses against most major currencies on Friday and over the weekend. The largest declines were detected against commodity-based currencies, as an increase in oil prices also added to the losses. The US Dollar dropped 1.45% versus the Aussie, 1.15% versus the Kiwi and 1.03% against the Loonie. Another notable decline was registered against the British Pound, while the USD/CHF edged only 0.26% lower. Gains, on the other hand, were seen versus the Euro and the Japanese Yen, 0.28% and 0.59%, respectively.
Japan's core machinery orders advanced in January, driven by large orders from the steel industry despite lingering concerns about China's economic slowdown. Core machinery orders, which strip out ships and utility items, surged 15.0% month-on-month in January, according to Japan's Cabinet Office, much stronger than the 2.0% gain forecast by analysts and above the 4.2% increase in orders in December. On an annual basis, core orders surged 8.4%. The rise in machinery orders suggests businesses are expecting a recovery in demand after a lacklustre December quarter, when the world's third biggest economy shrank 0.3% due to a sharp decrease in private consumption. While many economists predict growth to have recovered modestly in the current quarter, the clouded outlook for global demand has prompted some to forecast another contraction that will push Japan back into technical recession, defined as two quarters in a row of shrinking gross domestic product. Expectations for further fiscal and monetary stimulus could remain elevated due to concerns that turbulence in overseas economies could hurt consumer sentiment.
The Bank of Japan surprised investors in January with the introduction of negative interest rates, but the move has sparked concern that central bank is running out of tools to generate inflation.
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 Monday
There are no significant economic data releases scheduled for Monday both from the US and Japan. On Tuesday, however, the US Retail and Core Retail Sales are due. Both are released by the US Census Bureau measures and the total receipts of retail stores, but the Core Retail Sales exclude the automobile sector. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. According to the forecasts, the data is likely to weaken, compared to the previous month. Prior to that, the Japanese Monetary Policy Statement is due and is likely to set the mood for the Asian and European sessions tomorrow.USD/JPY in limbo just under 114.00
Even though the US Dollar outperformed the Japanese Yen on Friday, the exchange rate remained between the 112.00 and 114.00, namely within its consolidation range. Consequently, the Greenback is now expected to weaken, as trade opened less than ten pips from the upper border of the consolidation trend. However, a possibility of the USD/JPY currency pair edging higher towards 114.50, where the Bollinger band rests, exists, as technical studies are giving bullish signals. The base case scenario, on the other hand, is a decline to 113.28—the 20-day SMA, which is also reinforced by the weekly PP.Daily chart
It is becoming increasingly difficult for the Greenback to keep outperforming the Japanese Yen, as the resistance line keeps pushing the pair lower. The 200-hour SMA is mostly being ignored, thus, we might see the exchange rate drop towards 112.20 within the next two days.
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 61% of open positions are long, compared to 65% on Friday, and the Danish bank reports that 57% of its clients' positions are long (58% previously).
Spreads (avg, pip) / Trading volume / Volatility
Exactly a half expect the exchange rate to rise above 114 yen
Expectations are equally divided between above 114.00 yen and under 114.00 yen. The most popular choice implies that the Greenback is to rise above 120.00 yen in three months, selected by 18% of the voters. According to the votes collected between Feb 14 and March 14, the mean forecast for June 11 is 114.33. At the same time, 15% of the surveyed believe the Greenback could fall in under 108.00 yen after a three month period.