- The percentage of buy orders fell from 60 to 57%
- Right now 74% of open positions are long
- 70% say US Dollar is going to cost more than 120 yen in three months
- Support at 119.50 has repeatedly confirmed its topicality, increasing the chance of a yet another rally towards the major down-trend at 120.20
- Upcoming events: US Non-Farm Employment Change, Unemployment Rate, Average Hourly Earnings
The number of Americans applying for unemployment benefits fell to nine-week low, according to the US Labor Department. Initial jobless claims declined by 20,000 to 268,000 in the week ended March 28, overshooting economists' forecasts for 286,000. Continuing unemployment claims for the week ended March 14 also dropped to 2.325 million from 2.413 million reported in the preceding week. Earlier in the week however, the ADP jobs report showed 189,000 private sector jobs were added to the labour market in March, coming in shy of expectations and falling below the 200,000 threshold for the first time in ten months. A more comprehensive report on the labour market health, the US non-farm payrolls, will be released today. Analysts predict the report will show 245,000 new workers have been added to the US payrolls in March, down from 295,000 seen in the previous month.
Meanwhile, the US trade deficit shrank in February to the lowest level in more than five years. Exports continued to struggle with a strong US Dollar and sluggish overseas demand, while labour disputes at ports along the US West Coast undermined trade activity. The trade gap narrowed to $35.4 billion, the smallest since October 2009, the Commerce Department said. Imports contracted 4.4%, the biggest fall since February 2009, when the economy was still in the recession. Exports declined 1.6% to $186.2 billion, the lowest level since October 2012.
Jasper Lawler, CMC Market Analyst, expects Japan's economy to start losing momentum. Jasper commented that despite the level of stimulus the Japanese economy had, a decline is right around the corner. He said that "even though we have seen some pick up in the quarters passed, now there is some indication that actually the growth in manufacturing is not as strong as it should be, but is actually looking as if it is moving towards a decline."
David Starkey, Senior Market Analyst from Cambridge Mercantile Group, commenting on the Fed removing 'patience' from Fed's interest rate guidance, said that "Yellen lowered expectation for GDP, inflation, and as such – the trajectory of Fed rates." He noted that "in December the last economic projections were that the Fed rates would be over 1% at the end of 2015." However, the most recent data showed the Fed now only expects rates to go as high as 0.625% by the end of 2015.
Andrew Grantham, senior economist in CIBC World Markets, says that an increase in prices in the United States is unlikely to accelerate, at least on the core level and probably even on the headline level, "given that we have seen some further decline in oil prices since the end of February." According to him, it is improbable that year-view rates of inflation are going to get any stronger in the near-term (next 2-3 months). Still, "in terms of Fed policy, as long as they [headline and core inflation] do not decelerate significantly, they [the Fed officials] could still be looking to hike in June."
Non-farm employment change to decelerate
Even if there were other events scheduled for today, the United States labour market data would still decide most of the fluctuations in the foreign exchange market. Additionally, the risks of a surprise are exacerbated by low levels of liquidity, making it easier for larger moves to occur. The Bureau of Labor Statistics is expected to report somewhat slower growth in hiring than a month ago, while the growth in the average hourly earnings should pick up.
USD/JPY well-supported at 119.50
So far the recently established up-trend copes well with the bearish pressure and keeps guiding the pair north. Support at 119.50 is likely to be enough to prevent deeper decline from 120.00, and thus the monthly pivot point may soon be challenged once again. Beyond resistance at 120.00, the objective will be the 2014 high at 122.00. Meanwhile, additional supports are at 119.20 (weekly PP and 100-day SMA) and at 118.20 (weekly and monthly S1s).
Daily chart
Support at 119.50 has repeatedly confirmed its topicality, increasing the chance of a yet another rally towards the major down-trend at 120.20. Eventually this line should be broken, but for the time being the bulls are largely inactive.
Hourly chart
Almost three fourths of the SWFX traders are long
Even more people than yesterday expect the US Dollar to rally against the Japanese Yen. Right now 74% of open positions are long. On the other hand, the percentage of buy orders fell from 60 to 57% compared to the previous report.
In the meantime, OANDA traders are a little more cautious with respect to the outlook towards the Dollar, though they are still quite bullish, being that 63% of positions are long. At the same time, most SAXO Bank clients are bearish on the Greenback, 45% of positions are long and 55% are short.
Spreads (avg, pip) / Trading volume / Volatility
70% say US Dollar is going to cost more than 120 yen in three months
Concerning the week-end outlook, there are more bulls among the FX Community members than there are bears, but the advantage is slim: 53.8% are long and 46.2% are short. Nearly 24% of the surveyed expect USD/JPY to finish this week somewhere between the levels of 119.7 and 118.8, while the price intervals 120.5-119.7 and 118.8-117.9 were both picked by 19% of the respondents.
Panzer, commenting on the prospects for the pair, said "there is a real possibility to test strong resistance at 122.10 level," whereas for geula4x USD/JPY "seems bearish on the daily chart." He noted that resistance lies around 121.62, represented by the previous daily highs, and support lies at 118.25, which has held the price since February 9.
As for the longer-term perspectives, the consensus forecast for the first of July is 122.16. The conviction of traders in bullishness of the US Dollar is also shown by the fact that 70% of forecasts are placed above 120 yen, and the most popular price range was 124.50-123.00, chosen by 17% of the survey participants.