- The number of buy orders slid from 50 to 43%
- 66% of traders have a positive outlook towards the US Dollar
- Resistance rests around 103.50
- The weekly R1 and the 55-day SMA around 103.00 represent immediate support
- 61% of the survey participants expect the US Dollar to cost less than 105.00 yen in three months
- Upcoming events: US Average Hourly Earnings, US Non-Farm Employment Change, US Unemployment Rate, US Trade Balance, US Factory Orders
US manufacturing activity fell in the red territory during August despite last month's positive reading. The Institute for Supply Management's Manufacturing PMI came in at 49.4 points in the eight month of the year, following July's 52.6 hike and falling behind the 52.0 market forecast. The manufacturing sector contracted for the first time in five months; however, the overall economy expanded for 87 consecutive months, the report from the ISM showed on Thursday.
Other data released by the Labor Department showed that the number of Americans filing for unemployment benefits rose to 263,000 in the week ended August 27, compared to 261,000 claims registered in the previous seven days, while economic desks anticipated a steeper increase to 265,000 during the reported period. The four-week moving average of claims, considered a better measure of labor market trends, dropped 1,000 to 263,000. This marked 78 consecutive weeks of claims below the 300,000 level, the longest streak since 1973. In the meantime, continuing jobless claims increased 14,000 to 2.16 million in the week ending August 20. As the US economy approaches full employment, there is little scope for significant further declines in claims.
US NFP is the main driver today
A number of fundamental events are due today, which concern the US economy and the US Dollar particularly. The Non-Farm Payrolls will be the most important one, which presents the number of new jobs created during the previous month in all non-agricultural businesses. The monthly changes in payrolls can be extremely volatile, due to its high relation with economic policy decisions made by the Central Bank. The number is also subject to strong reviews in the upcoming months, and those reviews also tend to trigger volatility in the forex board. Generally speaking, a high reading is seen as positive for the USD, while a low reading is seen as negative, although previous months reviews and the unemployment rate are as relevant as the headline figure, and therefore market's reaction depends on how the market assets them all. Speaking about the Unemployment Rate, it is a percentage that surges from dividing the number of unemployed workers by the total civilian labor force. It represents the percentage of people actively seeking employment and willing to work. Usually, as a higher rate is seen as recessionary economies, while on the contrary, a growing economy sees its unemployment rate decreasing. Furthermore, attention should be paid to the Average Weekly Earnings today, while on Monday BoJ Kuroda's speech is to set the mood for trade during that day.USD/JPY: risks skewed to the upside
Even though the US Dollar weakened against the Yen on Thursday, the pair still experienced only an 18-pip loss. As a result, the eight-month down-trend received another confirmation and, technically, should trigger another USD/JPY sell-off. However, according to technical studies, that is not going to be the case, as signals suggest a rally. A breach of the immediate resistance cluster, represented by the weekly R2, the down-trend and the Bollinger band, could allow the Buck to retake the 104.00 level, which was also put to the test yesterday. Meanwhile, other data implies that the Greenback is to negate most of this week's gains, most likely ignoring the nearest support.Daily chart
The USD/JPY currency pair attempted to break through the down-trend yesterday, but for the time being the exchange rate was contained. However, risks are now skewed to the upside, with the down-trend getting breached if data turns into Greenback's favour.
Hourly chart
There are 66% of traders with a positive outlook towards the US Dollar today, while the number of buy orders slid from 50 to 43%.
Sentiment at Saxo Bank is virtually the same - 66% of the Denmark-based clients are currently holding long positions. Traders at OANDA are slightly less confident in Dollar's appreciation - as many as 63% of open positions are long. Using the data as a contrarian indicator, the sentiment implies a cheaper Dollar. There is little room for new buyers to enter the market, and if the bulls start closing positions on profit-taking, this could create a strong selling pressure.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall below 105.00 yen
Slightly more than half of the surveyed (61%) now assume that the US Dollar is to cost less than 105.00 yen after a three month time. The most popular choice, however, implies that the Greenback is to cost between 108.00 and 109.50 yen in three months, selected by 17% of the voters. According to the votes collected between Aug 02 and Sep 02, the mean forecast for December 02 is 103.43. At the same time, 13% of the surveyed believe the Greenback could cost either between 103.50 and 105.00 yen or even more than 109.50 yen in three months.