- 52% of all pending orders are to sell USD/JPY
- 61% of all open positions are short
- The nearest resistance is around 113.30
- Immediate support rests at 112.83
- Upcoming events: US LAbor Market Conditions Index, US JOLTS Job Openings, US Mortgage Delinquencies, US Import Price Index, US Monthly Budget Statement
The US unemployment rate dropped unexpectedly last month, as companies created more jobs than expected. The Department of Labour reported that US firms added 211K jobs to the economy in April, following the preceding month's revised down increase of 79K jobs and surpassing analysts' expectations for a 194K gain. Data also showed that the unemployment rate fell to 4.4%, down from March's 4.5%, whereas markets anticipated an acceleration to 4.6%. Meanwhile, average hourly earnings rose 0.3% last month, up from March's climb of 0.1% and in line with forecasts. According to analysts' projections, if job creation remains strong, the US labour market will likely hit full employment already this year. Friday's better-than-expected employment report combined with low initial jobless claims and the strong services PMI pushed up the odds of a June hike by the Federal Reserve.
Furthermore, some analysts said that the economy regained positive momentum in the Q1, suggesting that the Fed will likely be forced to raise rates at a quicker than initially expected pace this year.
No important data releases until Wednesday
There are no significant events worth paying attention to until Wednesday, when the US Import Price Index is due. It informs the changes in the price of imported products into the US. The higher the cost of imported goods, the stronger the effects they will have on inflation, redunding in a higher probability of a rate rise. Another event that could have some impact will be the US Monthly Budget Statement, which summarizes the financial activities of federal entities, disbursing officers, and Federal Reserve banks. A positive budget statement that receipts exceed budgetary outlays is seen as bullish for the USD.
USD/JPY to preserve the channel pattern
Strong US fundamentals helped the USD/JPY pair to completely recover from its intraday low on Friday and even edge 29 pips higher, retesting the descending channel's resistance line. Today the pair opened with a small bullish gap, but those gains are not expected to hold, with the channel's upper boundary still prevailing. The Greenback should now keep declining against the Yen until the 108.00 mark is reached. However, first the Buck is required to pierce the 55-day SMA, where demand could be sufficient and trigger another rally, eventually leading to the end of the channel pattern.Daily chart
The hourly chart supports the falling scenario with a solid slip south, and even appears to be forming a channel down pattern for the early stages of the senior downwave. The pair posted a very strong red candle the night before and has now been floating flatly at its bottom range. We will most likely expect the flattish motion to extend and possibly to gain a bit of upward momentum in order to address the upper boundary of the junior channel.
Hourly chart
Today 61% of traders are short the US Dollar, compared to 58% on Friday. Meanwhile, 52% of all pending orders are to sell the Buck (previously 58%).
Right now 52% of OANDA clients are bulls, losing four percent from before and the bullish sentiment has been holding around the same level for some time now. In the meantime, Saxo Bank clients manage to retain a positive outlook towards the US Dollar as well, being that 58% of their open positions are now long and the remaining 42% are short.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish on the Dollar
According to the poll that gathered forecasts between April 08 and May 08, traders expect the US Dollar to appreciate to 110.78 yen in three months' time, while the forecast for March 31 was 117.66 yen. It is also worth noticing that 50% of all forecasts fall under 111 yen, which is still above the current spot price. The majority of people who voted expect the US Dollar to cost somewhere between 112.50 and 114.00 yen in three months, with 19% of the survey participants choosing either one of these trading ranges. At the same time, the second most popular interval was the 115.50-117.00 one, with 13% of survey participants forecasting the range.