- The portion of commands to acquire the Buck went down to 60%
- There are only 62% of traders who are long the Greenback
- Immediate resistance is represented by the weekly and monthly R1s and the Bollinger band around 124.85
- The closest support is located at 123.59, namely the weekly PP
- 19% of traders expect the Greenback to cost between 124.50 and 126.00 yen in three months
- Upcoming events today: US Jobless Claims, Japanese Flash Manufacturing PMI
The US currency experienced mixed performance over the day, as it appreciated against some major peers and declined against the others. The Greenback added the most against the Loonie and the Aussie, namely 0.78% and 0.68%, respectively. Nevertheless, a 0.39% decline was registered against the British Pound, while remaining relatively unchanged versus the Euro and the Kiwi, gaining 0.11% against both of them.
US home resales surged to the highest level in more than eight years in June, while the median sales price hit an all-time high, according to the National Association of Realtors. Existing home sales rose 3.2% to a seasonally adjusted annual rate of 5.49 million in the reported month, whereas economists had predicted a 5.4 million annual rate. However, May sales were revised down to show an annual pace of 5.32 million. Existing sales are on track to record their biggest gain in eight years. June's positive home sales data came on the heels of last week's robust housing starts and building permits data. Housing starts soared 9.8% to an annualized pace of 1.174 million, the highest since July 2007. At the same time, building permits, which indicate the pace of future construction, surged 7.4% to an annualized pace of 1.343 million. A tightening labour market has begun to drive wages up, helping to spur demand for housing, especially among young adults. However, supply remains limited. The slew of strong housing reports indicate the world's number one economy remains on firmer footing despite a decline in retail sales and a slowdown in employment growth last month.
Meanwhile, a separate report showed the house price index climbed 0.4% on month in May, up from the 0.3% rise in the preceding month. The measure has remained in green territory since January 2014, except in September last year, when it posted zero growth.
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 Jobless Claims
The Department of Labor is to release the number of people who applied for unemployment benefits, the only relevant even to influence the USD/JPY today. Although this is considered to be an event of high importance, it tends to have a minor impact on the US Dollar crosses. Nevertheless, a gradual improvement in the labour market would budge the Fed to raise interest rates as soon as possible, thus, the resulting speculation could boost the Greenback as well. Furthermore, the Japanese Flash Manufacturing PMI is due tomorrow morning, also expected to show signs of improvement. However, according to historical data, the PMI disappointed four out of five times previously, suggesting the data might surprise to the downside once again.
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 in tight range between 123.60 and 124.80
Upon reaching the weekly PP yesterday, the US Dollar bounced back and appreciated up to 124.08 against the Japanese Yen. Furthermore, the bullish momentum is likely to be preserved through Thursday as well, as technical indicators are giving bullish signals in both the daily and the weekly timeframes. However, the USD/JPY currency pair appears to be stuck between the weekly PP and a resistance cluster around 124.85; thus, it is not expected to leave this trading range today.Daily chart
The USD/JPY rebounded from the 200-hour SMA, which helped the pair to retake the 124.00 major level. However, consolidation began upon reaching the mark, which ended with a rather sharp decline today, leaving the Greenback on the edge of piercing the 200-hour SMA. Support is expected to act again and hold the Buck at least above 123.80.
Hourly chart
Bulls still prevailing over bears
OANDA and SAXO clients retain their bullish perspectives towards the Buck. The share of longs at OANDA edged higher today, up from 51 to 55%, while the SAXO Bank's bullish sentiment slightly weakened, as 58% of traders still hold long positions today, compared to 59% yesterday.
Spreads (avg, pip) / Trading volume / Volatility
19% of traders expect the Greenback to cost between 124.50 and 126.00 yen in three months
According to the survey conducted between June 23 and July 23, 59% of the participants expect the US Dollar to cost more than 123 yen in three months. However, the mean forecast for October 23 is 123.57. Meanwhile, the 124.50-126.00 price interval received the largest amount of votes, namely 19%, while the second largest choices, all selected by 12% each, imply that the US Dollar will cost either less than 117.00 yen, or between 117.00 and 118.50, or between 126.00 and 127.50.
All in all, traders are bearish on the present pair this week, with 56.5% of responds being pessimistic. On average, traders believe the pair will decline to about the 123.7 level by the end of July 24.
Geula4x, one of the Dukascopy Community members, expects the US Dollar to advance against the Japanese Yen by week's end. He mentioned that "USD/JPY seems very bullish on the daily chart. Price has bounced significantly from the 120.50 support area. It seems that the Federal Reserve's principle decision to raise interest rates has strengthened the USD across the board." However, Jignesh, another Community member, is on the majority's side. "Without any major US data this week acting as a catalyst, the USD/JPY pair may be under some pressure", he said. Jignesh also added that as of last few sessions, we have seen the pair struggling to move higher, whilst the equities, which traditionally carry a high correlation, have done it.