- Number of orders set to acquire the Greenback surged, now accounting for 72% of all commands
- Portion of long positions increased to 56% (previously 55%)
- 17% of traders see USD/JPY between 123 and 124.5 by mid-June
- Nearest resistance is represented by the Weekly R1 at 121.61, while closest support is still the monthly R1 at 121.07
- Upcoming events: US PPI and Core PPI, US Preliminary UoM Consumer Sentiment, US Empire State Manufacturing Index, US Capacity Utilization Rate, US Industrial Production, US NAHB Housing Market Index
US retail sales unexpectedly declined for a third month in a row in February as harsh weather and tepid wage growth restrained shoppers. The Commerce Department said sales at US retailers fell by a seasonally adjusted 0.6% last month, against analysts' expectations for a 0.3% gain, and following the 0.8% drop in January. It was the first time since 2012 that sales had declined for three straight months. Core retail sales, which strip out automobiles and correspond most closely with the consumer spending component of gross domestic product, declined 0.1%.
Meanwhile, the number of initial jobless claims declined last week to a seasonally adjusted 289,000, the Labor Department reported. The preceding week's level was revised upwards to 325,000 claims, from an initially reported 320,000. Claims for the week ended February 28 week were the highest since May 2014. Yet, the four-week moving average for claims, which evens out week-to-week volatility, fell by 3,750 to 302,250 last week. Yet, the US labour market remains a bright spot in the Fed's assessment of the world's number one economy, particularly after the non-farm payrolls report revealed hiring in the US overshot expectations and remained above 200,000 for the 13th consecutive month, with 295,000 people added to the workforce in February. Consequently, the unemployment rate slid to 5.5%.
Joseph Lake, Economist at the Economist Intelligence Unit (EIU) agrees that the Retail Sales data were a bit disappointing, but it was not entirely unexpected. Joseph also mentioned that they are expecting a bit of a pullback for which there are two main reasons: "First of all, looking at the retail numbers, the decline in sales was pretty broad-based, it wasn't concentrated in anyone's sector, and that suggests that part of the cause was the extreme weather in different parts of the country, which just prevented people from getting out to the stores buying cars or different goods and services that they normally would have in February." Lake says that the second reason is really important: "The retail sales were reported in nominal terms and the US has just recently entered, what we expect, a very short period of deflation," adding that "this means that prices are actually falling across the US, so when you report Retail Sales numbers in nominal terms and prices are falling, you would expect retails sales totals to fall, but if you look at the real figures in adjusted terms, they should be much better."US PPI and Preliminary Consumer Sentiment anticipated to improve
Neither today, nor on Monday there will be any important data releases on the Japanese economy. However, the US PPI and Preliminary Consumer Sentiment are likely to show better figures, thus boosting the Greenback's value against the Yen.
USD/JPY experiences another setback
Joseph Lake also talks about the anticipated Consumer Confidence data. He thinks that the confidence will ease a bit, as it rose to an 11-year high in January and slightly edged down February. He adds that even if his forecast comes true, there is no place for concern, as the Consumer Confidence is still at extremely high levels by historical standards.
The Greenback failed to meet the expectations, as it slid instead of rallying yesterday after poor US Retail Sales data. The US Dollar tested the monthly R1 level and even attempted to reach the weekly PP at 120.49; however, the decline turned out to be not as harsh and the USD/JPY pair settled at 121.27. Technical studies suggest a hike in Dollar's value today, unless the US PPI and Preliminary Consumer Sentiment data are worse than the forecasts. Taking that into consideration, nearest resistance lies at 121.61, and a stronger cluster is located around 121.83, represented by the upper Bollinger band and 2014 high.
Daily chart
Yesterday the USD/JPY broke the trend-line to the downside amid worse-than-expected US Retail Sales data. However, in the second half of the day the Greenback started to regain momentum, but the rally was shallow, as the previous support trend-line now acts as resistance.
Hourly chart
Bullish sentiment grows
Both, the portion of long positions and the number of buy commands, increased. There are now 56% of longs (previously 55%), while the number of orders set to acquire the Greenback account for 72% of all commands.
OANDA traders' sentiment remains bullish, although slightly weaker than yesterday, as 57% of all positions are now long. Meanwhile, the gap between the bulls and bears among SAXO Bank's clients narrowed, since 55% of all positions are short and the remaining 45% are long.
Spreads (avg, pip) / Trading volume / Volatility
17% of traders see USD/JPY between 123 and 124.5 by mid-June
The sentiment among FX Community members changed significantly from the previous trading week, as now around 62% of traders suggest the Yen will continue to depreciate versus the Dollar.
Nuonrg, one of the survey participants, reckons that USD/JPY will maintain its bullish impetus, expecting the pair "to break the 120 level" and update the highs. Rokasltu, on the other hand, thinks that the Yen will advance versus the US Dollar. He defended his position by saying that "despite the strong US NFP data, the USD/JPY rate advance was not very substantial comparing to the previous USD/JPY rate increases after such surprising data." Consequently, "the potential for the upside is exhausted, and the pair might retreat during this week."