- Still no visible difference between the amounts of buy and sell orders
- Percentage of longs increased to 66%
- Immediate support is circa 101 yen
- Sell-off is likely to continue until we hit 100.70
- 61% of the survey participants expect the US Dollar to cost less than 105.00 yen in three months
- Upcoming events: FOMC Member George Speech, Japan Current Account, Final GDP QoQ
The US service sector expanded at the slowest pace in more than six years, official data revealed on Tuesday. The Institute for Supply Management said that its Non-Manufacturing PMI dropped to 51.4 points in August from the preceding month's 55.5, whereas market analysts anticipated a slight decrease to 55.4 in the reported month. Last month's reading was the weakest since February 2010. Nevertheless, readings above 50 points indicate an expansion in the services sector, and the US service sector grew for 79 consecutive months. Furthermore, the Non-Manufacturing Business Activity Index fell to 51.8, compared to July's reading of 59.3, showing growth for 85 straight months.
The New Orders Index declined to 51.4, following the previous month's 60.3. The Employment Index decreased to 50.7 percent from the July reading of 51.4. The Prices Index came in at 51.8 in August, down from the preceding month's reading of 51.9, reflecting growth for the fifth consecutive month. According to the ISM, 11 out of 18 non-manufacturing sectors reported growth last month. After the data release, the EUR/USD pair was seen trading at $1.1213 from around $1.1159 ahead of the release, whereas the GBP/USD pair was at $1.3404 from $1.3367 prior.
Japanese GDP growth to stay at zero
Today's main events for USD/JPY are likely to come in the form of the Japanese economic data right before the midnight. According to the latest forecasts, the surplus of exports over imports is to decrease insignificantly from 1.65 to 1.59 trillion yen. At the same time, GDP is to stagnate in quarterly terms.USD/JPY's outlook changed to negative
The bullish setup we mentioned in our previous reports is no longer topical. This is due to poor US data released yesterday, as a result of which the currency pair returned within the boundaries of the channel that has been forming since the last months of 2015. The immediate support is circa 101 yen, but the sell-off is likely to continue until we hit 100.70, where the monthly S1 coincides with 50% retracement of the 2012-2015 up-move. Current resistance is at 102.16, represented by the monthly pivot point.Daily chart
Short-term bearishness is also confirmed by the fact that USD/JPY has broken the 200-hour SMA, and it is now just a few dozen of dips away from a major demand area around 100.70. This zone is reinforced by the rising support line that was established in the second half of August.
Hourly chart
Regardless of Greenback's recent underperformance percentage of longs increased to 66%, as traders attempt to buy Dollar at low prices before the currency appreciates. Meanwhile, there is still no visible difference between the amounts of buy and sell orders.
The share of longs increased at Saxo Bank as well. There the percentage of bulls grew from 60 to 62%. Sentiment at OANDA is distinctly bullish as well, but there the distribution between the longs and shorts remains perfectly unchanged - 61 and 39% respectively.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall below 105.00 yen
Slightly more than half of the surveyed (61%) now assume that the US Dollar is to cost less than 105.00 yen after a three month time. The most popular choice, however, implies that the Greenback is to cost between 108.00 and 109.50 yen in three months, selected by 17% of the voters. According to the votes collected between Aug 02 and Sep 02, the mean forecast for December 02 is 103.43. At the same time, 13% of the surveyed believe the Greenback could cost either between 103.50 and 105.00 yen or even more than 109.50 yen in three months.