- 51% of all pending orders are to buy the US Dollar
- 52% of all open positions are long
- The nearest significant resistance is around 110.40
- The 109.22 area brings strong support
- Upcoming events: US CPI and Core CPI, US Retail Sales and Core Retail Sales, US Crude Oil Inventories, US Federal Funds Rate, FOMC Statement
US producer prices held steady last month amid low energy prices. The Labour Department reported on Tuesday that its Producer Price Index came in at 0.0% in May, following the preceding month's climb of 0.5% but meeting analysts' expectations. On an annual basis, the headline PPI rose 2.4%, compared to April's 2.5% jump, which was the largest yearly rise since February 2012. In the meantime, the so-called core PPI climbed 0.3% last month, following April's rise of 0.4%, whereas analysts expected core producer prices to increase 0.2%. Tuesday's data showed that energy prices fell 3.0%, the biggest drop since February 2016, after advancing 0.8% in April. The gasoline price dropped 11.2% last month, the biggest fall since February 2016.
On the other side, services prices climbed 0.3% in May, as final demand for trade services surged 1.1% last month. Back in April, services prices advanced 0.4%. Even though price pressures in the United States are weak, the Federal Reserve is widely expected to raise interest rates for the second time this year at the end of its two-day meeting on Wednesday.
Focus is on the Fed
A number of US fundamentals is due today, such as the US CPI, which is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchase power of USD is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. In Core CPI those volatile products, such as food and energy, are excluded in order to capture and accurate calculation. Second come the Retail Sales. They measure the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. The Core Retail Sales exclude the automobile sector. The Fed is also to decide on its funds rate today. With a pre-set regularity, a nation's Central Bank has an economic policy meeting, in which board members took different measures, the most relevant one being the interest rate, that it will charge on loans and advances to commercial banks. In the US, the Board of Governors of the Federal Reserve meets at intervals of five to eight weeks, in which they announce their latest decisions. A rate hike tends to boost the local currency, as it is understood as a sign of a healthy inflation. A rate cut, on the other hand, is seen as a sign of economic and inflationary woes and, therefore, tends to weaken the local currency. If rates remain unchanged, attention turns to the tone of the FOMC statement, and whether the tone is hawkish or dovish over future developments of inflation..
USD/JPY's rate depends on Fed's tone
The 200-hour SMA prevented the USD/JPY currency pair from appreciating yesterday, causing the Buck to remain relatively unchanged over the day. Today all eyes are on the Fed, as the tone of its meeting is likely to be the main market driver. From a technical perspective, the Greenback is likely to weaken against the Yen again, as the pair recently broke out from the broadening rising wedge pattern, the 200-hour SMA and the six-week down-trend keep providing rather strong resistance above the 110.00 mark, and technical indicators in all timeframes continue to emit bearish signals. With all signs suggesting a downside development, a positive surprise is likely to have a strong impact on the exchange rate should it occur, with the 111.50 area expected to be the intraday ceiling.Hourly chart
The down-trend keeps providing resistance, which could contribute to the possible bearish development today. In this case, the monthly S1 at 109.22 could fail to limit the losses, which would lead to a drop even under the 109.00 mark. However, these losses are unlikely to extend significantly beyond 108.50. A positive development, on the other hand, would allow the pair to take another step towards reaching the larger down-trend near 113.00.
Daily chart
Traders' sentiment turned neutral today, with 52% of all open positions being long and the other 48% - short. Meanwhile, there are 51% of all pending orders set to buy the Greenback.
At the moment, 59% of OANDA clients are long the US Dollar against the Yen, while the remaining 41% are short. In addition, Saxo Bank clients' sentiment slightly improved over the day, as 65% 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 14 and June 14, traders expect the US Dollar to appreciate to 112.56 yen in three months' time, while the forecast for March 31 was 117.66 yen. It is also worth noticing that 61% 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 either between 112.50 and 114.00 or between 115.50-117.00 yen in three months, with 16% of survey participants choosing each of these trading ranges. Furthermore, the 108.00-109.50 range was the second most popular one, with 14% of the voters choosing it.