- Buy orders now take up 51% of the market
- 58% of all open positions are short
- The nearest resistance is around 111.40
- Immediate support rests at 110.60
- Upcoming events: US Core PCE Price Index, US Personal Spending and Income, US CB Consumer Confidence
The US economy expanded at a stronger-than-initially-expected pace in the March quarter; however, an economic slowdown remained on the table in the second quarter. The Commerce Department reported on Friday that Q1 GDP growth came in at a seasonally adjusted annualised pace of 1.2%, compared to an originally reported pace of 0.7%. Meanwhile, analysts expected the economy to expand 0.9% in the reported quarter.
However, that was the worst performance over the past 12 months. Back in the Q4 of 2016, the economy grew 2.1%. Analysts suggested that the Q1 slowdown was mainly driven by the US President Donald Trump's inability to boost economic growth as promised. Even though the Q1 figure was revised up sharply, weak retail sales, business investment, falls in investment inventories and an increase of the goods trade deficit destroyed hopes for a rebound in the Q2. A separate report released by the Commerce Department showed that new orders for US-manufactured durable goods dropped 0.7% last month, whereas orders for core durable goods fell 0.4%.
Upcoming events: US Core PCE Price Index, Personal Income and Spending
Today focus is mostly on the US fundamentals, such as the Core PCE Price Index. It is an average amount of money that consumers spend in a month. "Core" excludes seasonally volatile products, such as food and energy, in order to capture an accurate calculation of the expenditure. It is also a significant indicator of inflation. Another event will be the US Personal Income, which measure the total income received by individuals from all sources, including wages and salaries, interest, dividends, rent, worker's compensation and transfer payments. This figure can provide insight on the US employment situation. Similarly, Personal Spending measures purchases of goods and services by households and by non-profit institutions that serve households from private business.
USD/JPY keeps sliding down
The USD/JPY currency pair opened the week with flat trade, but with the bearish momentum slightly prevailing. No changes are expected in yesterday's outlook, as risks are still skewed to the downside, as technical indicators are suggesting. The 55-day SMA and the weekly PP form a rather tough resistance around 111.40, which is likely to prevent the Greenback from recovering, but a tough demand cluster rests circa 110.35 as well. The given pair is expected to remain within this trading range of 100 pips in anticipation of the Friday's US NFP data.Daily chart
The US Dollar has been declining against the Japanese Yen for three weeks in a row now, which is indicated by a bearish trend-line. This down-trend is preventing the USD/JPY pair from recovering and now with the 200-hour SMA bolstering the resistance. Ultimately, this supports the daily outlook of another leg down.
Hourly chart
Traders' sentiment remains moderately bearish, with 58% of all open positions being short (previously 57%). At the same time, the portion of orders to acquire the US Dollar inched slightly up. The orders now take up 51% of the market.
At the moment, 55% of OANDA clients are long the US Dollar against the Yen, while the remaining 45% are short. In addition, Saxo Bank clients' sentiment once again improved, as 60% 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 April 30 and May 30, traders expect the US Dollar to appreciate to 113.05 yen in three months' time, while the forecast for March 31 was 117.66 yen. It is also worth noticing that 68% of all forecasts fall above 111 yen, which is above the current spot price. The majority of people who voted expect the US Dollar to cost somewhere between 115.50 and 117.00 yen in three months, with 18% of survey participants choosing this trading range. Furthermore, the 112.50-114.00 range was the second most popular one, with 16% of the voters choosing it.