- 52% of all pending orders are to sell the Buck
- 55% of all open positions are long
- The nearest significant resistance is around 111.80
- The 111.00 area is a significant support
- Upcoming events: US Current Account, Japanese Monetary Policy Meeting Minutes, US Existing Home Sales, US Crude Oil Inventories
US homebuilding activity rose slowed unexpectedly last month, official figures revealed on Friday. The Commerce Department reported that housing starts fell 5.5% to a seasonally adjusted annual pace of 1.09M units, the lowest since September 2016, following the preceding month's downwardly revised pace of 1.16M and falling behind analysts' expectations for decline to 1.23M-unit pace. On an annual basis, homebuilding dropped 2.4%. Single-family homebuilding fell 3.9% to a 194K-unit pace in May, the lowest in eight months, after hitting its almost 10-year high in February.
The volatile-family housing sector posted a drop of 9.7% to a 298K-unit pace last month. In the meantime, building permits plunged 4.9% to a pace of 1.17M units during the reported month, compared to the prior month's pace of 1.23M units, whereas analysts anticipated an increase to a 1.25M-unit pace. Despite weak data on homebuilding, analysts suggested that employment would boost home construction in the upcoming months, taking into account the jobless rate at a record low of 4.3% and strong job creation.
US Current Account is the only relevant event
One US data release is scheduled for Tuesday, namely the Current Account. It is a net flow of current transactions, including goods, services and interest payments into and out of the US. A current account surplus indicates that the flow of capital into the US exceeds the capital reduction. Wednesday does not bring a lot of data either, but traders could focus on the US Existing Home Sales, as those provide an estimated value of housing market conditions. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD. Early on Wednesday the Japanese Monetary Policy Meeting Minutes are also due, but their impact on the Yen is expected to be very limited.
USD/JPY attempts to break through 111.80
As was anticipated, the US Dollar was able to outperform the Japanese Yen on Monday. Further gains could be limited by the 111.80 level, namely the monthly PP, which could result in the recently acquired up-trend to be broken. A successful surge above the mentioned pivot point is expected to prolong the given pair's bullish momentum and put the monthly R1 at 113.35 into perspective. Technical studies, however, are unable to confirm the possibility of such an outcome, thus, we should not rule out the bearish scenario—a break of the up-trend. Even though the pair is supported by a number of significant levels, downside risks persist amid political and fundamental uncertainties. Ultimately, the pair could slide back to 109.22 if the up-trend gets pierced today.Hourly chart
The daily chart does not fully support the hourly one, as here downside risks are higher. First of all, the USD/JPY pair has no solid supports nearby. Second, the monthly PP is bolstered by the upper Bollinger band and the 100-day SMA. The overall trend also remains bearish, as the down-trend near 113.00 remains intact.
Daily chart
Traders' sentiment remains bullish, with 55% of all open positions being long and the other 45% - short. Meanwhile, there are 52% of all pending orders set to sell the Greenback.
At the moment, 64% of OANDA clients are long the US Dollar against the Yen, while the remaining 36% are short. In addition, Saxo Bank clients' sentiment slightly worsened over the day, as 55% 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 May 20 and June 20, traders expect the US Dollar to appreciate to 113.33 yen in three months' time, while the forecast for March 31 was 117.66 yen. It is also worth noticing that 61% of all forecasts fall above 112.50 yen, which is above the current spot price. The majority of people who voted expect the US Dollar to cost somewhere either between 108.00 and 109.50, or between 114.00 and 115.50 or even between 115.50 and 117.00 yen in three months, with 14% of survey participants choosing each of these trading ranges. Furthermore, the 112.50-114.00, the 117.00-118.50 or even the 118.50-120.00 ranges were the second most popular ones, with 11% of the voters choosing each of them.