- The portion of orders to acquire the US Dollar increased from 54 to 64%.
- Bearish traders' sentiment remains unchanged at 71%
- The monthly S1 around 118.93 are the nearest resistance
- Immediate support is around 118.40, represented by the 20-day SMA
- 57% of the survey participants expect the US Dollar to cost less than 120.00 yen in three months
- Upcoming events today: Japanese SPPI, US HPI, US Markit Services PMI, US CB Consumer Confidence
The US Dollar managed to appreciate against most major peers on Friday and over the weekend, due to a better-than-expected result of the US Existing Home Sales. As a result, the Greenback edged 0.92%, 0.85%, 0.71% and 0.62% higher versus the Yen, the Swissie, the Euro and the Kiwi, respectively. At the same time, USD/CAD dropped 1.03% lower, while the Cable inched 0.30% higher. The Buck, however, remained relatively unchanged against the Aussie, losing only 0.05%.
Business activity in the US manufacturing surged unexpectedly in January, rebounding from a more than three-year low. The flash manufacturing PMI reading from Markit climbed to 52.7, up from 51.2 in December, against economists' expectations for a reading to remain flat. As export orders showed signs of reviving, producers appeared to shrug off concerns about China. Given the recent volatility in financial markets, the sector's resilience is an encouraging signal for growth and employment in the wider economy.
A separate report showed US existing home sales rebounded in December from a 19-month low, while prices increased, adding to signs the US housing market continued to recover despite signs of a moderation in economic activity in recent months. According to the National Association of Realtors, home resales soared a record 14.7% to an annual rate of 5.46 million units. For all of 2015, sales reached 5.26 million, the highest annual level since 2006. The national median home prices surged to $224,100, up 7.6% from a year earlier. At the same time, inventories of existing homes for sales plunged 12% to 1.79 million in December. The recovery in the housing sector helped boost the economy. New-home construction last year hit the highest level since 2007, while residential investment has added to GDP for six straight quarters.
Vatsal Srivastava, director at the Blackwater Consulting, explains why the US Dollar is a advancing against the Yen this week. Even though he says that there was nothing fundamentally driving the USD/JPY on Monday, one of the key drivers is the falling oil prices, which is actually boosting the Yen, in his opinion, as there is an addition cause for more QQE. Vatsal Srivastava also mentions that "it is going to be a hard economic ride ahead and there seems to be no light on the horizon for Japan as of now". "Lets hope for the best," he added.
Uneventful Monday
Since there are no significant economic data releases on Monday, attention should be paid to some events on Tuesday, such as the US Consumer Confidence. The Consumer Confidence is released by the Conference Board and captures the level of confidence that individuals have in economic activity. A high level of consumer confidence stimulates economic expansion while a low level drives to economic downturn. Furthermore, the Markit Services PMI could also impact the market prices. The Services Purchasing Managers Index (PMI) is released by Markit Economics and captures business conditions in the services sector. As the services sector dominates a large part of total GDP, the services PMI is an important indicator of the overall economic condition in US.USD/JPY sets off with quiet trade
The Greenback overperformed at the end of the previous week, as the target resistance in face of the 20-day SMA was overcome. The USD/JPY now finds itself locked between the 20-day SMA from below and the monthly S1 from above. Meanwhile, technical indicators shifted from bearish to mixed, implying that the Buck could be on the path of recovering its bullish momentum and, thus, might end the day above the psychological level of 119.00. On the other hand, trade could remain flat, as supply and demand circa the opening price are equally strong.Daily chart
The USD/JPY extended trade within the borders of the ascending channel on Friday, retesting the upper border. Consequently, the pair bounced back and should confirm the lower boundary again today, before continuing the rally.
Hourly chart
Bears dominate the market
Other market participants, such as OANDA and SAXO Group, have a completely different sentiment, as the majority of their traders still hold long positions. Among SAXO Bank, 58% of traders remain long the US Dollar, whereas 61% of all positions at OANDA are also long (previously 60%).
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 120 yen
The largest half of the survey participants (57%) expect the US Dollar to cost less than 120.00 yen in three months. The most popular choice is the 114.00-115.50 price interval, selected by 31% of the voters; however, according to the votes collected between Dec 25 and Jan 25, the mean forecast for Apr 25 is 118.75. At the same time, 13% of the surveyed believe the Greenback could fall in the 120.00-121.50 price interval after a three month period.