- The share of purchase orders takes up 65%
- 55% of all open positions are long
- The 55-day SMA, the weekly PP and the 38.20% Fibo around 106.45 represent immediate resistance
- Support is 105.11
- 52% of the survey participants expect the US Dollar to cost less than 108.00 yen in three months
- Upcoming events: US Markit Services PMI, US CB Consumer Confidence, US New Home Sales
Official figures from the US Department of Labor showed on Thursday that the number of Americans filing for government unemployment benefits in the week ended July 16 dropped to 253,000 from 254,000 registered in the previous seven days, signalling that the labor market continues to improve. In the meantime, market analysts expected initial jobless claims to rise to 271,000 in the reported period, after remaining at a three-month low of 254,000 filings for two consecutive weeks. Last week was the 72nd consecutive week that initial claims were below the 300,000 level, extending the longest streak since 1973. Meanwhile, it is expected that jobless claims data can be volatile in July as automakers begin the process of temporarily shutting down plants to retool them for the new model year. In Michigan last week, applications for jobless benefits decreased 9,600 on an unadjusted basis, while claims in Ohio fell 2,500.
Other data on Thursday showed that factory activity in the country's mid-Atlantic region contracted in July, as the Philly Fed Manufacturing Index fell to -2.9 in the reported month, compared to the previous month's reading of 4.7, while analysts anticipated a slight improvement to 5.1 points.
Vatsal Srivastava, director at the Blackwater Consulting, explained why the US Dollar advanced against the Yen last week. He said there was nothing fundamentally driving USD/JPY on Monday, but one of the key drivers was the falling oil prices, which was actually boosting the Yen; in analyst's opinion, as there was an addition cause for more QQE. Vatsal Srivastava also mentioned that "it is going to be a hard economic ride ahead and there seems to be no light on the horizon for Japan as of now." "Lets hope for the best," he summed up.
Focus turns to US fundamentals on Tuesday
Today attention should be paid to the US Markit Services PMI and the New Home Sales figures. The Services PMI capture business conditions in the services sector. As the services sector dominates a large part of total GDP, the services PMI is an important indicator of the overall economic condition in US. As for the New Home Sales, they are an important measure of housing market conditions. House buyers spend money on furnishing and financing their homes so as a result the demand for goods, services and the employees is stimulated. Another possible event is the US CB Consumer Confidence, which captures the level of confidence that individuals have in economic activity. A high level of consumer confidence stimulates economic expansion, while a low level drives economic downturn. This event could have some impact on the US Dollar. Altogether these events could help the US Dollar recover from its fall earlier today.USD/JPY slumps ahead of central bank meetings
The US Dollar ended the day with another decline yesterday, falling below the 106.00 mark and completely negating Friday's gains. Earlier today the USD/JPY currency pair unexpectedly slumped below the 105.00 major level, amid growing skepticism that more easing from the BoJ will be successful in weakening the Japanese currency. The immediate support in this case is likely to be completely ignored, with all attention shifting to the cluster around 104.15, formed by the weekly S2, the monthly PP and the 20-day SMA. A drop beyond the 104.00 psychological level is unlikely, as the Buck is expected to partially recover from its current plunge during the day.On the hourly chart the US Dollar began forming a descending channel pattern, but it is uncertain whether it will completely emerge, as there are risks of the lower boundary getting breached present. The best case scenario would be a rebound from the lower border and a surge back towards 105.00, but today's fundamentals might not provide sufficient impetus for that.
Hourly chart
Today 55% of all open positions are long (previously 51%), whereas the share of purchase orders takes up 65% of the market, up from 27%.
There is a small but nevertheless bullish bias among OANDA and Saxo Bank traders as well. In case of OANDA, 55% of positions opened by its clients are long. Similarly, 55% of positions opened by Saxo Bank traders are long as well, compared to 54% on Monday.
Spreads (avg, pip) / Trading volume / Volatility
Slightly more than a half expect the exchange rate to fall below 108.00 yen
Exactly half of the surveyed (55%) now assume that the US Dollar is to cost less than 108.00 yen after 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 25% of the voters. According to the votes collected between June 26 and July 26, the mean forecast for Oct 26 is 105.88. At the same time, 12% of the surveyed believe the Greenback could cost either between 99.00 and 100.50 or between 100.50 and 102.00 yen in three months.