- 69% of all pending orders are to acquire the Buck
- 58% of all open positions are long
- The nearest significant resistance is around 111.80
- The 111.00 area is a significant support
- Upcoming events: US Current Account, Japanese Monetary Policy Meeting Minutes, US Existing Home Sales, US Crude Oil Inventories
US homebuilding activity rose slowed unexpectedly last month, official figures revealed on Friday. The Commerce Department reported that housing starts fell 5.5% to a seasonally adjusted annual pace of 1.09M units, the lowest since September 2016, following the preceding month's downwardly revised pace of 1.16M and falling behind analysts' expectations for decline to 1.23M-unit pace. On an annual basis, homebuilding dropped 2.4%. Single-family homebuilding fell 3.9% to a 194K-unit pace in May, the lowest in eight months, after hitting its almost 10-year high in February.
The volatile-family housing sector posted a drop of 9.7% to a 298K-unit pace last month. In the meantime, building permits plunged 4.9% to a pace of 1.17M units during the reported month, compared to the prior month's pace of 1.23M units, whereas analysts anticipated an increase to a 1.25M-unit pace. Despite weak data on homebuilding, analysts suggested that employment would boost home construction in the upcoming months, taking into account the jobless rate at a record low of 4.3% and strong job creation.
Quiet beginning of the week
There are no significant data releases on Monday, but one US data release is scheduled for Tuesday, namely the Current Account. It 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. Wednesday does not bring a lot of data either, but traders could focus on the US Existing Home Sales, as those provide an estimated value of housing market conditions. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD. Early on Wednesday the Japanese Monetary Policy Meeting Minutes are also due, but their impact on the Yen is expected to be very limited.
USD/JPY to put 111.80 to the test
Even though the USD/JPY currency pair remained relatively unchanged on Friday, the bullish momentum seems to be intact. A new trend-line is supporting the pair's exchange rate, but is unlikely to last long due to its sharp angle. Nevertheless, the Buck is likely to appreciate again today, as there are no significant bearish signals. The recovery could well last until the 111.80 level is reached, where the monthly pivot point rests. Resistance here could be sufficient to reverse momentum, as the Greenback was forced to edge lower in a similar situation in the beginning of the month. A successful breach of the monthly PP, on the other hand, should open the door for a much stronger recovery, with the main target being the 114.40 handle, namely the May's high.Hourly chart
Due to Thursday's recovery, the six-week down-trend was breached, which means the pair could potentially reach a larger scale resistance line, namely the seven-month one. Ahead of this line the USD/JPY pair still has one strong supply area on its path – the cluster circa 112.00, where the 100-day SMA coincides with the monthly PP and the upper Bollinger band.
Daily chart
Traders' sentiment remains bullish, with 58% of all open positions being long and the other 42% - short. Meanwhile, there are 69% of all pending orders set to buy the Greenback.
At the moment, 65% of OANDA clients are long the US Dollar against the Yen, while the remaining 35% are short. In addition, Saxo Bank clients' sentiment slightly worsened over the weekend, as 58% 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 19 and June 19, traders expect the US Dollar to appreciate to 113.25 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 112.50 yen, which is above the current spot price. The majority of people who voted expect the US Dollar to cost somewhere either between 114.00 and 115.50 or between 115.50 and 117.00 yen in three months, with 14% of survey participants choosing each of these trading ranges. Furthermore, the 108.00-109.50, the 112.50-114.00, the 117.00-118.50 or even the 118.50-120.00 ranges were the second most popular ones, with 11% of the voters choosing each of them.