- The portion of purchase orders dropped from 64 to 35%
- Market sentiment remains bullish at 71%
- The weekly S1 at 112.56 represents immediate resistance
- Support is the rising support line at 111.79
- 52% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events: FOMC Members Dudley, Rosengren and Bullard Speeches, US Preliminary UoM Consumer Sentiment, US Existing Home Sales
With the retained post-FOMC weakness, the US Dollar experienced another day of declines against other major currencies. The largest slump was seen against the New Zealand Dollar, namely 1.85%, while other significant losses of 1.53%, 1.26% and 1.04% were detected against the Sterling, the Aussie and the Yen, respectively. As the Buck was the worst performer yesterday, the Greenback edged 0.83% lower versus the Euro, 0.92% versus the Loonie and 0.95% against the Swiss Franc.
The number of Americans applying for unemployment benefits increased from the lowest level in five months hit last week, but remained below a level associated with an improving labour market. Initial claims for jobless benefits rose 7,000 to a seasonally adjusted 265,000 for the week ended March 12, according to the Labor Department. However, the previous week was revised to show 1,000 fewer applications received than reported earlier. Claims have been below 300,000, a threshold associated with strong labour market conditions, for 54 weeks in a row, the longest run since 1973. The four-week moving average of claims, a better gauge of labour market trends as it strips out week-to-week volatility, rose 750 to 268,000 last week. Moreover, job openings rose to a six-month peak in January, while gauge of future economic activity climbed in February after two consecutive months of drops. The data should further fan fears of a looming recession and could keep the Fed on track to gradually hike interest rates this year. Job openings advanced by 260,000 to a six-month high of 5.5 million in January. While hiring declined in January, as employers are facing troubles finding qualified workers for open positions.
A separate report showed the current account deficit declined 3.6% to $125.3 billion in the fourth quarter. For 2015, the current account shortfall totalled $484.1 billion, the largest since 2008.
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.
Preliminary UoM Consumer Sentiment is the only relevant event today
Friday is not rich on economic data releases, with only the US Preliminary UoM Consumer Sentiment due. The Preliminary UoM Consumer Sentiment is released by the Reuters/University of Michigan and is a survey of personal consumer confidence in economic activity. It shows a picture of whether or not consumers are willing to spend money. Apart from this release, several FOMC members are scheduled to speak today. Their speeches are likely to cause volatility in the USD crosses today.USD/JPY attempts to begin recovery
The USD/JPY currency pair slumped for the fourth consecutive day yesterday, retaining its post-Fed weakness. The 112.00 psychological level failed to hold the losses, but the weekly S2 at 111.28 succeeded. This support could keep the US Dollar afloat today, but technical indicators retain mixed signals, suggesting that either outcome is possible. Technically, we should see a rebound, as a drop below 111.00 might cause the BoJ to intervene. The Bollinger band just above the opening price is the only obstacle on the pair's path towards retaking the 112.00 level.Daily chart
The US Dollar plunged towards 110.70 yen on Thursday, but managed to remain above the Feb low afterwards. The pair appears to be holding above the 111.00 major level for now, but a breach is possible if more bearish momentum is created by weak data and dovish statements.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 67% of open positions are long (66% yesterday). The sentiment as reported by SAXO Bank is only marginally bullish - 59% of currently open positions are long, up from 58% recorded 24 hours ago.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to rise above 114 yen
The majority (52%) 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 either to rise above 120.00 yen in three months or fall below 108.00 yen in three months, both selected by 18% of the voters. According to the votes collected between Feb 18 and March 18, the mean forecast for June 18 is 114.00. At the same time, 13% of the surveyed believe the Greenback could fall in the 114.00-115.50 price interval after a three month period.
Dukascopy Community members are suggesting the pair will highly appreciate during this week. The price will most likely hit 114.1 by this Friday, as 80% of members are having bullish outlook. Despite bullish outlook, this price is slightly below last week's average price of 115.
A member of the Dukascopy Community under the nickname westline suggests that the Yen has been very strong for the last month. "But since economic data is weakening, this could result to a short decline in the near-term", he warned.
Meanwhile, Likerty commented: The USD/JPY is preparing for a final test of the lows, around 111.60 mark."