- The portion of buy orders increased from 44 to 64%
- 74% of traders still hold long positions
- The weekly S1 at 112.56 represents immediate resistance
- Support is the rising support line at 111.79
- 53% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events: US Philly Fed Manufacturing Index, US Jobless Claims, US Current Account, US JOLTS Job Openings, Japanese Monetary Policy Meeting Minutes
Due to a dovish Fed statement the US Dollar declined against all other major currencies on Wednesday. The largest losses were registered against commodity-based currencies, namely the Loonie, the Kiwi and the Aussie, slumping 1.94%, 1.84% and 1.25% against them, respectively. The US Dollar's performance against the Euro and the Swissie was also poor, as the EUR/USD edged 1.03% higher, while the USD/CHF plunged 1.04%. The smallest decline of 0.55% was registered against the Japanese Yen, only 0.55%.
Japan's exports dropped for the fifth consecutive month in February, the longest losing streak since 2012. Merchandise exports plunged 4.0% from a year earlier to 5.703 trillion yen, according to the Ministry of Finance. The decline followed the previous month's 12.9% plunge. Although shipments to China rose 5.1%, the first increase in seven months, worries remain that sluggish overseas demand could push the world's third biggest economy into its fourth recession in five years. Exports to the broader Asian region decreased 6.1%, the sixth consecutive monthly decline, while exports to the US, the largest importer of Japan-made goods, climbed a modest 0.2% after sliding for two months in a row. Export volumes rose 0.2% from a year earlier, a modest increase but the first in eight months. Japanese imports plummeted 14.2% in February to Y5.461 trillion, the 14th consecutive monthly decline. As a result, Japan's trade balance came to a Y242.8 billion surplus compared with a Y426.0 billion shortfall in the same month a year earlier.
The Bank of Japan said earlier in the week it would keep its massive asset buying programme at existing levels but offered a bleaker view of Japan's economy, suggesting it may introduce more stimulus as it struggles to reach the inflation target.
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.
Philadelphia Fed Manufacturing Index and US Current Account
Concerning the economic data releases, the Philly Fed Manufacturing Index and the US Current Account are the events to pay attention to. The Philadelphia Fed Survey is a spread index of manufacturing conditions (movements of manufacturing) within the Federal Reserve Bank of Philadelphia. This survey, served as an indicator of manufacturing sector trends, is interrelated with the ISM manufacturing Index (Institute for Supply Management) and the index of industrial production. It is also used as a forecast of The ISM Index. The Current Account is released by the Bureau of Economic Analysis and is a net flow of current transactions, including goods, services, and interest payments into and out of the US. A current account surplus indicates that the flow of capital into the US exceeds the capital reduction. Figures of both events are forecasted to improve. Early tomorrow the BoJ's Monetary Policy Meeting Minutes are due, which are to set the mood for Friday's Asian session.USD/JPY poised for more weakness
The Fed's dovish statement weakened the US currency on Wednesday, allowing the Yen to push the pair beyond the triangle pattern's support line. More bearish momentum is now expected to follow, but with the closest support located at 111.90, represented by the lower Bollinger band. Meanwhile, technical studies in the longer timeframes keep giving bearish signals, bolstering the probability of the negative outcome. Furthermore, the immediate resistance in face of the weekly S1 just above the opening price is weighing on the USD/JPY pair, but the exchange rate could still remain above 112.00, as this major level kept the US Dollar afloat for six weeks now.Daily chart
The triangle pattern was breached to the downside, opening the door for an even sharper decline that is taking place today. The USD/JPY currency pair is now expected to fall all the way down to 111.00 major level, namely the February low.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 66% of open positions are long (65% yesterday). The sentiment as reported by SAXO Bank is only marginally bullish - 58% of currently open positions are long, down from 59% recorded 24 hours ago.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to rise above 114 yen
The majority (53%) now assumes that the US Dollar is to cost more than 114.00 yen after three month time. 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 17 and March 17, the mean forecast for June 17 is 114.23. At the same time, 17% of the surveyed believe the Greenback could fall in under 108.00 yen after a three month period.
Dukascopy Community members are suggesting the pair will highly appreciate during this week. The price will most likely hit 114.1 by this Friday, as 80% of members are having bullish outlook. Despite bullish outlook, this price is slightly below last week's average price of 115.
A member of the Dukascopy Community under the nickname westline suggests that the Yen has been very strong for the last month. "But since economic data is weakening, this could result to a short decline in the near-term", he warned.
Meanwhile, Likerty commented: The USD/JPY is preparing for a final test of the lows, around 111.60 mark."