- Sell orders now take up 63% of the market.
- Today 74% of all open positions are long
- The 20-day SMA around 113.00 represents immediate resistance
- Support is the weekly PP at 112.11
- 64% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events: FOMC Member Bullard Speech, US New Home Sales, US Crude Oil Inventories, US Durable and Core Durable Goods Orders, US Jobless Claims
The American Dollar experienced mixed performance over the day, as it appreciated against some major peers, but declined against the others. Amid a terrorist attack in Brussels, the British currency weakened and lost 1.14% versus the US Dollar, while the Buck also added 0.38% against the Yen, 0.29% versus the Swiss Franc, 0.21% against the Euro and 0.12% versus the Kiwi. However, the Greenback had issues outperforming the remaining two commodity currencies, as the AUD/USD surged 0.58% and the USD/CAD dropped 0.40% lower.
The US manufacturing activity rose slightly in March, underscoring concerns that have been surrounding America's manufacturing sector, hit by a stronger US Dollar and signs of global slowdown, for some time already. Markit's flash manufacturing PMI ticked up to 51.4 in the reported month, up from the final February print of 51.3, but below economists' expectation for the preliminary reading to come in at 51.9. Manufacturers have been struggling with weakening global demand, exacerbated by a strong US Dollar, which hurts domestic producers' competitiveness abroad, coupled with the rout in energy prices that has resulted in decreased spending budgets across the oil patch. While new business volumes increased in March, the latest rise was only slightly quicker than in February and still weaker than the post-crisis trend.
The report earlier in the week showed sales of previously owned US homes declined more than expected in February after hitting the second highest level since 2007, a sign that demand for housing could be weakening due to increasing prices and low inventory. The National Association of Realtors reported that existing home sales plunged 7.1% in February from the preceding month to an annual rate of 5.08 million units, the lowest level since November.
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.
US New Home Sales
This Wednesday is rather quiet in terms of fundamental data and economic data releases. The only relevant event today is the US New Home Sales. The number of New Home Sales, released by the US Census Bureau, is an important measure of housing market conditions. House buyers spend money on furnishing and financing their homes so as a result the demand for goods, services and the employees is stimulated. According to the forecast, a slight improvement is expected in the figure.USD/JPY under the risk of plunging under 112.00
The Greenback extended its gains against the Yen on Tuesday, breaching the immediate resistance in face of the weekly PP. The US Dollar is expected to prolong its rally, but with gains limited by the 113.00 major level, which in turn is reinforced by the 20-day SMA. The USD/JPY pair's main target is the descending channel's resistance line around 113.50, but setbacks might also occur, as technical indicators suggest. The exchange rate could return back below the 112.00 mark and find support only around 111.44, represented by the Bollinger band.Daily chart
The USD/JPY currency pair seems to be prolonging its rally, but now faces the 200-hour SMA, which might cause a trend-reversal. In this case, the Greenback is likely to begin declining back towards the Feb low of 110.97, while a successful breach of the SMA is to open the door for a retest of the resistance line around 113.50.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 64% of open positions are long, unchanged since yesterday. The sentiment as reported by SAXO Bank is keeps improving - 60% of currently open positions are long, up from 58% recorded on Tuesday.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 114 yen
The majority (64%) now assumes that the US Dollar is to cost less than 114.00 yen after three month time. The most popular choice implies that the Greenback is either to cost somewhere between 106.50 and 108.00 yen in three months, selected by 23% of the voters. According to the votes collected between Feb 23 and March 23, the mean forecast for June 23 is 112.17. At the same time, 33% of the surveyed (equally divided) believe the Greenback could fall either in the 108.00-109.50, or 112.50-114.00, or even in the 114.00-115.50 price interval after a three month period.
Keeping in mind absolute bullish sentiment last week, now Dukascopy Community members are equally divided on the nearest future development of this currency pair. The median forecast is located slightly below the 112.9 mark for Friday of this week.
A trader with the Dukascopy Community, megajorko, believes that the US Dollar could still appreciate against the Japanese Yen. "This week's Friday will be the last in this month when there will be GDP announcements. After the strong sell off of the USD a correction is expected. The yen is starting to gain some power but it is in deep overbought levels so I am expecting a good correction this week," megajorko commented.
At the same time, Likerty suggests that more bearish momentum could follow. He said that "the USD/JPY is showing intentions to test the lows before deciding whether to proceed with its overdue bullish correction towards 117 and above."