- 58% of all pending orders are to acquire the US Dollar
- 53% of all open positions are short
- The nearest resistance significant resistance is near 111.00
- The 109.00 mark is a potential turnaround point
- Upcoming events: US JOLTS Job Openings, US Crude Oil Inventories, US Consumer Credit, Japanese Final GDP, Japanese Current Account
Business activity in the US non-manufacturing sector fell last month but remained in the expansion territory for the 89th straight month. The Institute for Supply Management reported on Monday that its PMI for the US services sector dropped to 56.9 in May from the prior month's 57.5, whereas analysts anticipated a slighter decrease to 57.1 points during the reported month. The ISM said that 17 non-manufacturing industries reported growth last month. The New Orders Index fell to 57,7 from April's 63.2, whereas the Prices Index declined to 49.2 in May from 57.6, marking the first drop in 13 months.
Meanwhile, the Employment Index surged to 57.8 from the preceding month's 51.4, surprising markets after the weak NFP Report released last week. Analysts said that growth in the non-manufacturing sector remained solid despite May's drop, as the growth rate and the Employment Index remained high. Moreover, 15 industries reported employment growth, while just one posted an employment fall. The following employment figures suggested that weak slow job creation in the private sector would be temporary.
Uneventful Tuesday
There are no significant events due today, thus, focus turns to the data on Wednesday. From the US side the Consumer Credit will be released. It is an amount of money that individuals borrowed. It shows if consumers can afford large expenses, which can fuel economic growth. However, a high figure may also indicate that the economy is overheating, as consumers borrow in order to live beyond their means. From the Japanese side the Final GDP is due. It is the monetary value of all the goods, services and structures produced in Japan within a given period of time. GDP is a growth measure of market activity because it indicates the pace at which the Japanese economy is growing or decreasing. The Japanese Current Account is also due. It is a net flow of current transactions, including goods, services and interest payments into and out of Japan. A current account surplus indicates that the flow of capital into Japan exceeds the capital reduction. A current account deficit indicates that there is a net capital outflow from these sources.
USD/JPY breaches triangle's support
A set of weak US fundamental data yesterday caused the USD/JPY pair to undergo another decline, with the two-week support line failing to hold the losses early morning today. The 109.00 level is now exposed, with the only significant support on the Greenback's path being the monthly S1 at 109.22. However, the lower Bollinger band might also be a sufficient interim support, which could help the Buck remain afloat, but technical studies are unable to confirm that, as the daily signals are still distinctly bearish. A close in the red zone today would imply the end of the triangle pattern, while a recovery from the intraday low would mean the pattern's apex is yet to be reached. A recovery is doubtful, as there are no certain market movers present today.Hourly chart
On a larger scale outlook the USD/JPY pair is doomed to keep edging lower, with a potential recovery expected to take place once the exchange rate approaches the 108.00 mark. A rebound could occur earlier, but the 108.00 handle is the final support which could provide the required momentum for the six-week down-trend to be retested.
Daily chart
Traders' sentiment remains neutral, with 51% of all open positions are short and the other 49% are long. Meanwhile, there are 58% of all pending orders set to purchase the Greenback.
At the moment, 60% of OANDA clients are long the US Dollar against the Yen, while the remaining 40% are short. In addition, Saxo Bank clients' sentiment slightly improved over the weekend, as 60% 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 May 06 and June 06, traders expect the US Dollar to appreciate to 112.46 yen in three months' time, while the forecast for March 31 was 117.66 yen. It is also worth noticing that 64% 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 112.50 and 114.00 in three months, with 19% of survey participants choosing this trading range. Furthermore, the 115.50-117.00 range was the second most popular one, with 17% of the voters choosing it.