- 49% of orders are to acquire the US Dollar
- 66% of all open positions are short
- The nearest resistance is at 113.38
- Immediate support rests at 112.85
- Upcoming events: US Crude Oil Inventories, Japanese Preliminary GDP, US Initial Jobless Claims, Philadelphia Fed Manufacturing Index
US homebuilding activity dropped in April; however, revisions of the preceding month's readings suggested that homebuilding activity continued improving. The Census Bureau reported on Tuesday that housing starts declined 2.6% to a seasonally adjusted annual pace of 1.17M units last month, following March's upwardly revised 1.28M-unit pace and falling behind expectations for a 3.7% rise to a 1.26M-unit pace. Analysts suggested that a slowdown in homebuilding activity had been driven by unusually rainy weather in California. On an annual basis, housing starts were up 10.5% compared to the same period a year ago.
Meanwhile, building permits fell 2.5% to a seasonally adjusted pace of 1.23M units, whereas analysts anticipated a slight climb of 0.2% to a 1.27M-unit pace in April. With building permits higher than housing starts, homebuilding activity is set to rebound in the upcoming months. Later in the day, the Federal Reserve reported that industrial production in the United States rose 1.0% in April, the largest gain since February 2014, while analysts expected industrial output to climb just 0.4%.
Japanese GDP
Tomorrow early morning the Japanese Preliminary GDP is due. It shows the monetary value of all the goods, services and structures produced in Japan within a given period of time. GDP is a gross measure of market activity, because it indicates the pace at which the Japanese economy is growing or decreasing. Further events are from the US side, namely the Philadelphia Fed Manufacturing Index. It is a spread index of manufacturing conditions within the Federal Reserve Bank of Philadelphia. Served as an indicator of manufacturing sector trends, it is interrelated with the ISM Manufacturing Index and the Index of Industrial Production. It is also used as a forecast of the ISM Index. The other event is the Initial Jobless Claims, which are a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labour market. A larger than expected number indicates weakness in this market, which influences the strength and direction of the US economy.
USD/JPY slumps on safe-haven demand
As was anticipated, the USD/JPY currency pair found support near 112.90 yesterday, where the monthly R1 and the 100-day SMA rest. The Buck remains under pressure today as well, which suggests a close is likely to occur below this demand area, paving the way towards a drop to the 112.00 major level. Support around that area is expected to be sufficient to limit the intraday losses, even though technical studies are unable to confirm this scenario. Furthermore, there are no solid market movers present today and with demand for the safe-haven currency higher, no other factor should cause a sudden recovery.Daily chart
The long-anticipated scenario began to play out, with the USD/JPY currency pair starting to move towards the broadening rising wedge's support line. At this rate the pair has a chance of reaching it on Thursday, but with the exchange rate expected to close around 112.00.
Hourly chart
Bears keep pushing further, with 66% of all open positions being short now. Meanwhile, the portion of orders to acquire the US Dollar lost three percentage points over the day, having fallen to a total of 49%.
Right now 48% of OANDA clients are bulls, losing one percentage point from before, first time the sentiment turned bearish in a long time, even though just a little. In the meantime, Saxo Bank clients manage to retain a neutral outlook towards the US Dollar, being that 54% of their open positions are now short and the remaining 46% are short.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish on the Dollar
According to the poll that gathered forecasts between April 17 and May 17, traders expect the US Dollar to appreciate to 111.28 yen in three months' time, while the forecast for March 31 was 117.66 yen. It is also worth noticing that 57% of all forecasts fall above 111 yen, which is still below the current spot price. The majority of people who voted expect the US Dollar to cost somewhere between 112.50 and 114.00 yen in three months, with 17% of the survey participants choosing this trading ranges. At the same time, the second most popular intervals were the 114.00-115.50 and the 115.50-117.00 ones, with 13% of survey participants forecasting each of these trading ranges.