- The share of sell orders edged higher from 51 to 54%
- Bullish market sentiment takes up 71% of the market
- The weekly R1 at 107.88 represents immediate resistance
- Support is at 106.71
- 59% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: US Labor Market Conditions Index, FOMC Member Dudley Speech, US JOLTS Job Openings, US Wholesale Inventories
The Greenback outperformed most major currencies on Friday and over the weekend, despite a poor reading of the NFP data. The US Dollar gained the most against the Australian counterpart, amid the RBA's monetary policy decision. Lesser gains were registered against the other two commodity currencies, namely 0.68% against the Kiwi and 0.44% versus the Loonie. At the same time, the Buck added 0.50% against the Swissie and 0.39% versus the Sterling, while remaining relatively unchanged against the Euro (adding 0.01%). Meanwhile, the USD/JPY currency pair suffered a 0.13% decline over the weekend.
Bank of Japan policy makers were confident the world's third biggest economy is recovering, but some were concerned about a continued slowdown in consumer inflation, the minutes of the March meeting showed. The BoJ voted to keep monetary policy intact, as officials decided to refrain from any additional surprises that could fuel additional volatility in the domestic and global markets. However, some officials voiced worries over signs of "adverse effects" of negative interest rates, which added to "anxiety among "financial institutions and depositors". They also highlighted that the measure had "exacerbated" market volatility and created "excessive expectations for further monetary easing." The BoJ introduced negative interest rates in January, joining the Euro zone, Sweden, Denmark and Switzerland in adopting the unconventional policy. Since then, Japan has slipped back into deflation, adding further doubts about Abenomics. With Japan sliding back into deflation in March, investors widely expected the central bank to ease policy further at last month's policy meeting.
The BoJ did however revised its outlook on economic growth and inflation. Policymakers were cautiously optimistic about the recovery, despite the economy shrinking in two of the past three quarters. Japan's Cabinet Office will release preliminary first quarter GDP figures next week. Japan's economy contracted at an annualized 1.1% pace in the fourth quarter.
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 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.
Calendar takes a breath for two upcoming days
In the two upcoming two days there are no significant economic data releases from the US, but on Tuesday the JOLTS Job Openings could have some impact on the USD pairs. The JOLTS Job Openings are released by the Bureau of Labor Statistics; they are a number of job openings during the reported month, excluding the farming industry. Although it is released late, it could still have an impact on the market, because job openings are a leading indicator of overall employment.USD/JPY to keep climbing higher
For the fifth consecutive day last week, the US Dollar remained relatively unchanged against the Japanese Yen, unable to maintain trade below the 107.00 mark. Downside risks persist, as technical indicators in the daily timeframe suggest, with the nearest support located at 106.71, represented by the weekly pivot point. However, the USD/JPY currency pair appears to be reluctant to return under the 107.00 major level, with bulls pushing the exchange rate higher. The Buck now faces the weekly R1 at 107.88, which is the closest possible resistance area. The second target rests circa 108.70, but is reachable only if the 108.00 level is overcome during the day.Daily chart
On the hourly chart, the USD/JPY currency pair is seen continuing to edge higher. The 200-hour SMA could limit the gains, but the main target is still located higher, the US Dollar is then expected to retake the 108.00 level.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 71% of open positions are long, three percentage points more from Friday. Meanwhile, the sentiment as reported by SAXO Bank remains bullish at 57%, compared to 59% on Friday.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to rise above 114 yen
More than half of the surveyed (56%) now assumes that the US Dollar is to cost more than 114.00 yen after three month time. The most popular choice implies that the Greenback is to cost somewhere between 114.00 and 115.50 yen in three months, selected by more than a quarter (32%) of the voters. According to the votes collected between April 09 and May 09, the mean forecast for August 09 is 111.89. At the same time, 20% of the surveyed believe the Greenback could cost between 115.50 and 117.00 yen in three months.