- Portion of commands to acquire the US Dollar rose up to 77%
- 60% of market participants are long the Buck
- 16% of traders see USD/JPY between 123 and 124.5 by mid-June
- Nearest resistance is represented by the 2014 high around 121.84, while closest support is still the monthly R1 at 121.07
- Upcoming events: US Building Permits, US Housing Starts, US Treasury Sec Lew Speech, US FOMC Statement, Japanese Trade Balance
US industrial production rose less than expected in February, clouding optimism over the economic outlook. Output of manufacturers, mines and utility producers climbed 0.1% last month, missing the predicted 0.2% gain and following a downwardly revised 0.3% decline in January. Meanwhile, manufacturing output dropped by a seasonally adjusted 0.2% in February, disappointing forecasts for a 0.1% rise and following the 0.3% decline in January. The report also showed that the capacity utilization rate, a measure of slack in the industrial sector, fell to 78.9% in February, down from 79.1% in January, compared with expectations for a reading of 79.5%. It is unclear whether the fall in manufacturing is temporary, caused by harsh weather, or if it is a sign of underlying weakness in the world's number one economy that could persist.
Meanwhile, a separate report showed optimism among US home builders continued to decline, with March marking the worst month since last summer. The housing market index dropped to 53 points this month, missing expectations for a rise to 57 points and following 55 points last month, the National Association of Home Builders reported. Yet, the gauge is still well above the crucial 50-point threshold, suggesting vast majority of builders view conditions as good.
Joshua Mahony, Market Analyst from IG Group, thinks that the monthly report from BoJ is not going to have much of an effect and therefore it is whittling down between the interest rate decision and statement. He also does not reckon that any change will be made in terms of the interest rate decision and QE programme, as he ponders that "they are going to wait and see in terms of whether the CPI really is going to be impacted significantly, because of the downturn in oil, and really whether those effects from oil are going to be temporary or they are going to have influence upon the medium term expectation."Focus on US Building Permits
The most important data release today is the US Building Permits, which is expected to have better figures than in the preceding month. As a result, the Greenback is likely to edge up against the Yen. Also, at the end of the day, at 11:50 PM GMT, Japanese trade deficit is expected to widen, which can be an additional positive factor for USD/JPY.
USD/JPY relatively unchanged
Even though the US Dollar edged down against the Japanese Yen yesterday, the losses were insignificant. USD/JPY tested the monthly R1, but remained at the level of the open price. On Tuesday, the USD/JPY pair is expected to rise, and the technical indicators are bolstering this outcome. If the US data does not surprise to the downside, the Greenback might go as far as the 2014 high today.
Daily chart
USD/JPY remained directionless on Monday. Overall the currency pair is still following an upward trend, trading between the 200-hour SMA and resistance trend-line. The Greenback is expected to approach the trend-line later today, where it is likely to meet strong opposition, as the area is backed by the 2014 high.
Hourly chart
Even stronger bullish sentiment
Liquidity consumer confidence improved over the day, as 60% of market participants are long the Buck. At the same time, the portion of commands to acquire the US Dollar rose up to 77%.
OANDA traders' sentiment towards the US Dollar improved, as now 58% of the clients are long the Greenback. Meanwhile, the gap between bulls and bears among SAXO Group traders widened, as 56% of positions are now long.