- The number of orders to buy the Greenback surged from 40 to 83%
- 64% of all open positions are long
- Resistance rests at 101.60
- The weekly S1 at 100.55 represents immediate support
- 55% of the survey participants expect the US Dollar to cost less than 108.00 yen in three months
- Upcoming events: US Building Permits, US CPI and Core CPI, US Housing Starts, US Capacity Utilization Rate, US Industrial Production
Sales at US retailers unexpectedly fell in July, official data revealed on Friday. According to the Department of Commerce, retail sales came at a seasonally adjusted 0.0% in the reported month, compared to the previous month's upwardly revised figure of 0.8%, while economic desks pencilled in a deceleration to 0.4%. Furthermore, core retail sales, excluding automobiles, dropped a seasonally adjusted 0.3% in the seventh month of the year, whereas the preceding month's gain was revised up to 0.9% from the originally reported increase of 0.7%, whereas analysts expected a decrease to 0.2%. Separate reported released by the Department of Labor on the same day showed that US producer prices returned to contraction in July after three months of consecutive growth, as the Producer Price Index dropped 0.2% on an annual basis in the reported month, following the 0.3% rise registered in July. Month-over-month, US factory gate inflation declined 0.4% in July, compared to the 0.5% gain seen in the preceding month, while market analysts anticipated a fall to 0.1% in the reported period.
Meanwhile, the University of Michigan Consumer Sentiment survey released on Friday showed that mood among US shoppers improved in August, as it preliminary Consumer Confidence Index rose to 90.4, compared to July's final print of 90.0, while markets predicted the Index to come in at 91.5 in the reported period.
US CPI is the main driver today
A number of US fundamentals is due today, with the most important being the CPI. The CPI is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. In Core CPI, however, volatile products such as good and energy are excluded in order to capture an accurate calculation. Other data could play its part as well, namely the US Building Permits, the Capacity Utilization Rate and the Industrial Production. The Building Permits show the number of permits for new construction projects. It implies the movement of corporate investments (US economic development). It tends to cause some volatility to the USD. The Industrial Production shows the volume of production of US industries such as factories and manufacturing. Up-trend is regarded as inflationary, which may anticipate interest rates to rise. If high Industrial Production growth comes out, this may generate a positive sentiment for the USD. Finally, the Capacity Utilization is the percentage of the US production capacity, which is actually used over the short-time period. It is indicative of overall growth and demand in the US economy. A high capacity utilization stimulates inflationary pressures.USD/JPY risks slipping to a fresh five-week low
The USD/JPY currency pair remained flat yesterday, but experienced a rather sharp sell-off in the beginning of Tuesday, amid the return of risk-aversion. Technical indicators also point to the Buck's bearish outcome today, but the pair still has the potential to recover from its intraday lows if today's US inflation data surprises with strong figures. Moreover, the 101.00 psychological support remained intact for two weeks, despite volatility stretching lower. Downside pressure could lead the US Dollar even below the weekly S1, namely the nearest support, with the pair then once again facing the 100.00 mark.Daily chart
With the second attempt to breach the up-trend on Monday the exchange rate edged significantly lower earlier today. The USD/JPY currency pair is now likely to continue sliding down with the 100.00 level being the main target.
Hourly chart
Today 64% of all open positions are long, compared to 61% on Monday. Moreover, the number of orders to buy the Greenback surged dramatically, having risen from 40 to 83% over the past 24 hours.
Sentiment at Saxo Bank is virtually the same - 65% of the Denmark-based clients are currently holding long positions. Traders at OANDA are even more confident in Dollar's appreciation - as many as 70% of open positions are long. Using the data as a contrarian indicator, the sentiment implies a cheaper Dollar. There is little room for new buyers to enter the market, and if the bulls start closing positions on profit-taking, this could create a strong selling pressure.
Spreads (avg, pip) / Trading volume / Volatility
Slightly more than a half expect the exchange rate to fall below 108.00 yen
Slightly more than half of the surveyed (55%) now assume that the US Dollar is to cost less than 108.00 yen after a three month time. The most popular choices, however, imply that the Greenback is to cost either between 109.50 and 111.00 yen or even more than 112.50 yen in three months, both selected by 18% of the voters. According to the votes collected between July 16 and August 16, the mean forecast for November 16 is 105.80. At the same time, 16% of the surveyed believe the Greenback could cost somewhere between 99.00 and 100.50 yen in three months.