- The number of buy orders in the 100-pip range from the spot added four percentage points, and now they amount to 67% of all the pending commands
- The market sentiment remains unchanged: 55% of positions are long
- 23% of traders see USD/JPY above 124.5 by mid-May
- Nearest resistance is located around 121.61 weekly R1, whereas the closest support is represented by the monthly R1 at 121.07
- Upcoming events: US JOLTS Job Openings, Japanese Core Machinery Orders, US 10-y Bond Auction, US Crude Oil Inventories, US Bank Stress Test Results
While the government's non-farm payrolls data showed US employers created more jobs than expected in February, the Fed's own composite gauge of conditions in the US labour market dropped in February. The labour market conditions index declined to 4 points, the worst result since August and following a downwardly revised 4.8 points in December. The LMCI is based on 19 indicators, with monthly change to payrolls and the unemployment rate having the biggest weight. Thus, the fall in the index came as a surprise, given the robust labour market data last week.
Meanwhile, more economists believed the Fed's policy is appropriate. According to the National Association for Business Economics, 58% of economists thought the Fed's approach was "about right", compared with 53% in August. Around 36% said monetary policy was too stimulative, down slightly from 39% in August. Some 71% of the 293 respondents predict the Federal Open Market Committee policy makers to hike interest rates sometime this year. 62% of the NABE's survey participants believe the first rate hike will take place in the second half of this year, up from 34% in August last year. A quarter anticipated the central bank to maintain current policy course until 2016 or later, while only 9% expect the FOMC raising rates in the first half of 2015.
Andrew Wilkinson, Chief Market Analyst at Interactive Brokers, said that "the Japanese economy probably requires further stimulus from Bank of Japan", adding that the question "whether or not massive quantitative easing at the BoJ is actually working for the domestic economy" remains topical.US JOLTS Job Openings on Tuesday and Japanese Core Machinery Orders on Wednesday
On Tuesday, the US JOLTS Job Openings are expected to slightly increase, whereas the Japanese Core Machinery Orders are likely to turn to the negative side of -3.9% the next day. Hence, the data releases are to influence positively the US Dollar, strengthening it against the Yen.
USD/JPY marches forth
According to Andrew Wilkinson, there are signs that "the market is getting back into that mode of expecting further stimulus." As a result, it is reasonable to "expect the Yen to continue weakening into 120s."
The US Dollar started the week by gaining value against the Japanese Yen. Even though the Greenback was seen to have enough strength to breach the initial resistance level, represented by the monthly R1, the supply proved to be sufficient in order to stop the rally. The USD/JPY pair settled at 121.13 and is likely to edge up further today, despite neutral technical indicators. Growth in Japanese Core Machinery Orders is expected to turn to the negative side, thus putting pressure on the Yen, whereas the nearest resistance lies at the 2007 June 7 high at 121.70.
Daily chart
So far through Tuesday the US Dollar has been rallying. Minor setbacks were seen on the way, such as at the daily R2 and 2007 June high, which kept the pair from rising unhindered. However, in the last hour the USD/JPY pair managed to breach resistance. If the US data are better than expected, then the Greenback might surge up to the supply area near 122.36.
Hourly chart
Sentiment remains unchanged
In the meantime, the market sentiment remains unchanged: 55% of positions are long. The number of buy orders in the 100-pip range from the spot added four percentage points, and now they amount to 67% of all the pending commands.
OANDA traders' optimism with respect to the Greenback slightly edged down, since 54% of open positions are long. In the meantime, the majority of SAXO Bank traders remain bearish, being that still 60% of open positions are short and the remaining 40% are long.