- Pending orders are equally divided between the buy and the sell ones
- 57% of all open positions are short
- The nearest resistance is around 111.45
- Immediate support rests at 110.76
- Upcoming events: US Core PCE Price Index, US Personal Spending and Income, UK GfK Consumer Confidence
The US economy expanded at a stronger-than-initially-expected pace in the March quarter; however, an economic slowdown remained on the table in the second quarter. The Commerce Department reported on Friday that Q1 GDP growth came in at a seasonally adjusted annualised pace of 1.2%, compared to an originally reported pace of 0.7%. Meanwhile, analysts expected the economy to expand 0.9% in the reported quarter.
However, that was the worst performance over the past 12 months. Back in the Q4 of 2016, the economy grew 2.1%. Analysts suggested that the Q1 slowdown was mainly driven by the US President Donald Trump's inability to boost economic growth as promised. Even though the Q1 figure was revised up sharply, weak retail sales, business investment, falls in investment inventories and an increase of the goods trade deficit destroyed hopes for a rebound in the Q2. A separate report released by the Commerce Department showed that new orders for US-manufactured durable goods dropped 0.7% last month, whereas orders for core durable goods fell 0.4%.
Upcoming events: US Core PCE Price Index, Personal Income and Spending
Since there are bank holidays in most countries today, focus turns to Tuesday's fundamentals, such as the US Core PCE Price Index. It is an average amount of money that consumers spend in a month. "Core" excludes seasonally volatile products, such as food and energy, in order to capture an accurate calculation of the expenditure. It is also a significant indicator of inflation. Another event will be the US Personal Income, which measure the total income received by individuals from all sources, including wages and salaries, interest, dividends, rent, worker's compensation and transfer payments. This figure can provide insight on the US employment situation. Similarly, Personal Spending measures purchases of goods and services by households and by non-profit institutions that serve households from private business..
USD/JPY remains on the back foot
Even though Friday's fundamentals turned out to be better than expected, the Core Durable Goods Orders still weighed on the Buck, ultimately resulting in the USD/JPY pair weakening that day. As a result, the pair prolonged its consolidation, once again putting the 111.00 level to the test. Technical indicators today suggest the Greenback could attempt to pierce the 111.00 mark to the downside again, which would leave the tough support cluster around 110.30 to limit the losses in the future. Trade is likely to be relatively flat this week ahead of Friday's NFP data.Daily chart
Even though the US Dollar refrained from falling towards the 110.50 level, the attempt to recover from Friday's decline is likely to be short-lived, as the 200-hour SMA is expected to trigger another spark of bearish momentum. This time, the drop should be sufficient to reach the 100.50 handle within the next few days.
Hourly chart
There are 57% of traders holding short positions today, compared to 58% on Friday. Meanwhile, all pending orders in the 100-pip range are equally divided between the buy and the sell ones.
At the moment, 56% of OANDA clients are long the US Dollar against the Yen, while the remaining 44% are short. In addition, Saxo Bank clients' sentiment slightly improved over the last weekend, as 59% of their open positions are now long.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish on the Dollar
According to the poll that gathered forecasts between April 29 and May 29, traders expect the US Dollar to appreciate to 113.11 yen in three months' time, while the forecast for March 31 was 117.66 yen. It is also worth noticing that 70% of all forecasts fall above 111 yen, which is above the current spot price. The majority of people who voted expect the US Dollar to cost somewhere between 115.50 and 117.00 yen in three months, with 19% of survey participants choosing this trading range. Furthermore, the 112.50-114.00 range was the second most popular one, with 16% of the voters choosing it.