- The portion of purchase orders added five percentage points. The commands now account for 58% of the market
- 72% of traders are still long the Buck
- 17% of traders expect the US Dollar to cost 123.00-124.50 yen after a three-month period
- Nearest resistance rests around 119.20, represented by the weekly PP and the 100-day SMA, while closest support lies at 118.44, the Bollinger band
- Upcoming events: US Consumer Confidence, US Core Personal Consumption, US GDP Annualized, US Fed Interest Rate Decision
Activity growth in the US services sector slowed in April amid a decline in new business growth, but the pace of employment in the sector quickened to the fastest since last June. Markit's flash reading of services PMI slid to 57.8 in the current month from a final 59.2 in March, the highest level since August. Economists, however, had expected the gauge to fall to 58.2. On index, any reading above 50 points to expansion in the sector's business activity. Markit's reading of employment at service companies, meanwhile, rose to the highest level in 10 months of 55.4 in April 54.0 a month earlier. Moreover, service sector companies are generally optimistic about the economy, with positive sentiment at its highest level since January. The services index's new business sub-component retreated slightly from the previous month, when it had reached the highest level since September.
Meanwhile, Markit's composite PMI, a weighted average of manufacturing and services indexes, declined to 57.4, down from 59.2 in March. Last week Markit said growth in the manufacturing sector's activity slowed in the current month by the most in six months, but remained firmly in expansion territory. The Markit data suggest annual gross domestic product growth could accelerate to around 3% in the three months through June from an anaemic first-quarter pace of around 1.0%.
Stephen Pope, a managing partner, gives his opinion about the current situation concerning the Bank of Japan. He says that if you want to find any shock revelations about what the BoJ are up to, one actually has to start digging quite deeply into the data. Stephen comments that the data a lot of data mining is required, because at the current time it is uncertain whether the Abenomics, the Three Arrows, are really working. He also adds that "there has been a lot of pressure from the Government on the BoJ to be a heavy intervention machine, so almost sacrificing their independence in order of making Abenomics work and pushing Japan foreward."
Craig Erlam, Senior Market Analyst at OANDA, commenting on the prospects of the Fed raising interest rates this year, said that there is no real difference between the Fed raising rates either in June or in September. In his opinion September just seems more likely, because it gives the Fed more time to prepare for the hike. Craig also does not see the immediate necessity for a rate hike in September, but thinks that "there is just a number of policymakers who want to test the water with the first hike, see how the markets react, how economy holds up."
US Consumer Confidence
Neither today nor tomorrow will there be any data releases concerning the Japanese economy. However, the US Consumer Confidence is expected to slightly improve today. This is a high-impact event, which should force the USD/JPY to rally; however, the expected figures are barely different, that the data might even surprise to the downside.
Marcel Thieliant, economist from Capital Economics, forecasts USD/JPY to be at 130.00 by the end of the second quarter. The analyst commented that he expects the BoJ to step up the pace of easing at the end of this month. "This is obviously not what other economists expect, if that happens, we will probably see a strong drop in the Yen against the Dollar and against other major currencies," he said.
USD/JPY awaits Consumer Confidence
On Monday, the USD/JPY pair surged according to expectations. Even though the US Dollar managed to go over 119.40, it closed at 119.12, just two pips higher than the forecast. The Greenback edged closer to a group of resistances, which might turn the tide for the given currency pair. Technical indicators are showing bearish signs, bolstering the negative outcome. A fall beyond 119 is the likely outcome; however, a surprising hike in the US fundamentals might trigger further rally towards 119.50.
Daily chart
Since the end of last week, the USD/JPY pair has been sliding down. The Greenback suffered sharp losses last Friday and attempted to rebound yesterday. However, the resistance trend-line forced the US Dollar back down. Right now the pair is consolidating over 119, slowly approaching the trend-line again, where it is expected to meet resistance and suffer another loss.
Hourly chart
Bullish sentiment unchanged
Market sentiment remained unchanged, with 72% of traders still being long the Buck. The portion of purchase orders added five percentage points. The commands now account for 58% of the market.
OANDA traders' sentiment slightly worsened, as 66% of all positions are long, compared to 69% yesterday. Meanwhile, SAXO Group traders' outlook towards the Buck, on the other hand, improved, as 73% of traders are long the Greenback today.
Spreads (avg, pip) / Trading volume / Volatility
17% of traders expect the US Dollar to cost 123.00-124.50 yen after a three-month period
The mean forecast for July 28 is 120.82. The majority of traders (61%) expect the Greenback to cost more than 120 yen in three months. The most popular choice was 123.00-124.50 price interval, selected by 17% of survey participants, while the second place was taken by 121.50-123.00, voted for by 15% of traders.