- The share of buy orders slid from 44 to 39%
- 60% of traders have a positive outlook towards the US Dollar
- Immediate resistance is represented by the weekly and monthly S2s and the lower Bollinger band around 119.00
- The closest support is located around 117.10, namely the monthly and weekly S3s
- 21% of traders expect the Greenback to cost either between 123.00 and 124.50 yen or between 124.50 and 126.00 yen in three months
- Upcoming events today: US Durable and Core Durable Goods Orders, US Crude Oil Inventories, FOMC Member Dudley Speech
The Greenback advanced against most major peers on Tuesday, with exception against the Kiwi and the Yen. The largest gain was recorded against the Aussie, namely 1.04%, following with a 0.62% gain versus the Swissie, 0.44% versus the Loonie, 0.41% versus the Sterling and 0.25% against the Euro. The Buck suffered minor losses of 0.27% and 0.12% against the Yen and the Kiwi, respectively.
US consumer confidence rose more than expected in August to the second-highest level in eight years as Americans held a more favourable view of the labour market. According to the Conference Board, the consumer confidence index surged to 101.5 this month, from a revised 91.0 in July. The present situation index, which measures current conditions, increased to a post-recession peak of 115.1 from 104 in the previous month. The future expectations index soared to 92.5 from 82.3. The share of Americans, who viewed jobs as "plentiful" rose from 19.9% in July to 21.9% in August, hitting the highest level since January 2008. Those who viewed jobs as "hard to get" plunged from 27.4% in July to 21.9% in August. Analysts predicted the advance in consumer confidence should support more robust consumer spending in coming months, thereby helping the economy strengthen further.
In a separate report, the Commerce Department said new home sales rose 5.4% to a seasonally adjusted annual rate of 507,000 units. Demand for new properties is likely to keep growing amid solid employment, low borrowing costs and a lack of available existing homes. The improving outlook may underpin more residential construction, contributing to the economic expansion in the second half of the year.
Sean Yokota, head of Asia Strategy at SEB comments that the BoJ needs to get the debt down before all the baby boomers retire, so they need to go through some fiscal consolidation, whether through tax hikes or through spending cuts. He also mentioned that such measures put Japan into recession, but he thinks that it also gave a bit of confidence to people; that this time when you increase the taxes, it does hit you short-term, but you can come out of the recession. Overall, Yokota reckons that the Japanese economy is still doing relatively O.K. and the equity markets are still pretty high.
Craig Erlam, Senior Market Analyst at OANDA, commenting on the prospects of the Fed raising interest rates this year, said that there is no real difference between the Fed raising rates either in June or in September. In his opinion September just seems more likely, because it gives the Fed more time to prepare for the hike. Craig also does not see the immediate necessity for a rate hike in September, but thinks that "there is just a number of policymakers who want to test the water with the first hike, see how the markets react, how economy holds up."
US Durable Goods Orders and FOMC Member Dudley Speech
The Japanese side holds no significant economic data releases that could substantially influence the USD/JPY currency pair today. Meanwhile, from the US side, the most important event is the Durable Goods Orders. The given event is important, as it attracts large investments, which are sensitive to the US economic situation. The forecast stands at -0.4%, down from 3.4%; a rather sharp decline is expected, which is likely to weigh on the Greenback. Furthermore, the New York's Fed official is scheduled to speak today at 14:00 PM GMT, who might provide some hints concerning the Fed's monetary policy, especially the interest rate hike. Volatility is expected during his speech.
Marcel Thieliant, economist from Capital Economics, forecasts USD/JPY to be at 130.00 by the end of the second quarter. The analyst commented that he expects the BoJ to step up the pace of easing at the end of this month. "This is obviously not what other economists expect, if that happens, we will probably see a strong drop in the Yen against the Dollar and against other major currencies," Thieliant said.
Steve Lucas, technical analyst at 3CANALYSIS, gives their perspectives on the USD/JPY currency pair. "We have persistently been bullish of USD/JPY, but in the very short-term we think there will be a pullback", he said. Steve explained their view by mentioning that since the pair posted the 12.5 year high in June, last week put in a bearish reversal candle, which is a negative signal. "We also think that the deception out there is that the Fed is going to be a little easier on raising interest rates and people are going to be a bit cautious and a bit sensible and take the money off the table", the analyst added.
USD/JPY takes another shot at retaking 120.00
The US Dollar's volatility to the upside reached the weekly S1 at 120.41, but was instantly pushed back, ultimately resulting in a slight decline. Even though technical indicators are now giving bearish signals, the USD/JPY is still expected to recover today and negate yesterday's losses. However, trade opened just under a strong resistance cluster, which could force the pair to sustain more losses if the fundamental data weighs on the Greenback. On the other hand, in case of the odds being in Buck's favour, the 120.00 major level is likely to be retaken today.Daily chart
After a sharp decline on Monday, the US Dollar began consolidating against the Japanese Yen, unable to retake the 120.00 major level. However, risks of edging even lower persist, amid poor US fundamental expectations, which could force the Buck drop to the Monday's low of 116.19.
Hourly chart
Bulls still prevailing over bears
OANDA and SAXO clients retain their bullish perspectives towards the Buck. The share of bulls at OANDA increased to 65%, up from 63%. Meanwhile, 57% of SAXO Group clients retain a positive outlook towards the Greenback.
Spreads (avg, pip) / Trading volume / Volatility
21% of traders expect the Greenback to cost either between 123.00 and 124.50 yen or between 124.50 and 126.00 yen in three months
According to the survey conducted between July 26 and August 26, 64% of the participants expect the US Dollar to cost more than 123 yen in three months. However, the mean forecast for November 26 is 123.39. Meanwhile, the highest number of poll participants, namely 21%, suggest that the US currency will cost either between 123.00 and 124.50 yen or between 124.50 and 126.00 yen in three months, while the second largest choices, selected by 12% of the surveyed each, imply that the US Dollar will cost between 117.00 and 118.50 yen, between 120.00 and 121.50 yen or between 126.00 and 127.50 yen.
The survey among Dukascopy Community members shows traders are still widely bearish on the perspectives of the USD/JPY cross, as more than 72% of all votes are negative towards the US Dollar.
A member of the Dukascopy Community, RacerX, gave his view on the USD/JPY. "This is a tough call, if investors selloff on US equities, the Dollar will likely strengthen. Conversely, a selloff on the Nikkei will strengthen the Yen. I see the selloff in the US markets to be harsher than in Japan." Another Dukascopy Community member, williamb, has a bearish outlook towards the Buck. "Yen is on the resistance from some time, with the volatility, that appears to decrease. A correction is imminent," he stated.