Average Hourly Earnings were forecast to show a monthly increase of 0.3%. The actual income change is just 0.2%. Non-Farm Employment Change was expected to show a reading of 176,000 new jobs. The reality is that only 114,000 new jobs have been created. Market consensus was that the Unemployment Rate would be at 4.1%. Released number shows unemployment at 4.3%.
The USD/JPY declined and with it confirmed the existence of a channel down pattern that has been guiding the rate down. Friday's trading ended in the middle of the pattern, near the 147.00 mark.
In the meantime, it was spotted that Dukascopy traders were 70% long even prior to these events. However, by Monday, they were still holding the long positions in expectations of a recovery.
Economic Calendar
On Monday, the Institute for Supply Management will publish the Services sector Purchasing Managers Index. The index is the result of a survey of top 300 managers in the services sector. A reading above 50.0 is positive. A reading below 50.0 is seen as negative.
Market consensus forecast is that the reading will be a positive 51.4. A reading below this number should cause a decline of the US Dollar.
Besides the mentioned event, the second week of August lacks notable events. The only event that could cause a market reaction is the publication of the weekly US Unemployment Claims on Thursday at 12:30 GMT.
USD/JPY hourly chart analysis
A continuation of the decline appears to have no support as low s the 145.00 mark and the lower trend line of the channel pattern.However, a potential recovery of the US Dollar against the Yen is set to face the descending upper trend line of the channel pattern. In addition, note that the USD/JPY keeps respecting round exchange rate levels.
Hourly Chart
USD/JPY daily candle chart analysis
In general, the background is clear - Bank of Japan is tightening, the Federal Reserve is forced to ease policy. The USD/JPY is heading down and is set to continue to do so. It appears that prior high levels are providing short term support to the rate.In the meantime, the already steep decline has turned vertical. Due to this reason, it is likely that one of the support ranges will force the pair into a consolidation by either fluctuating sideways or retracing back up.
Read More: Technical Analysis
Traders are long
After the US publication, open positions were 73% long.
Meanwhile, pending orders in the 100-point range around the rate were 55% to sell.
On Thursday, traders were 70% long and orders were 70% to sell. It appears that traders have observed oversold conditions and are in long positions.
However, they were too early, as the decline extended far above all expectations. It can be fairly assumed that traders are sitting on losses and expecting the retracement back up.
Meanwhile, pending orders in the 100-point range around the rate were 55% to sell.
On Thursday, traders were 70% long and orders were 70% to sell. It appears that traders have observed oversold conditions and are in long positions.
However, they were too early, as the decline extended far above all expectations. It can be fairly assumed that traders are sitting on losses and expecting the retracement back up.