- Now 51% of all orders are to acquire the Buck
- Bulls are prevailing over bears, taking up three quarters of the market (75%)
- 17% of traders expect the US Dollar to cost either between 121.50-123.00 or 123.00-124.50 yen in three months
- Nearest resistance rests around 119.20, represented by the weekly PP and the 100-day SMA, while closest support lies at 118.30, the Bollinger band and the weekly and monthly S1s
- Upcoming events: US Continuing and Initial Jobless Claims, US Personal Income and Spending, Chicago Purchasing Managers' Index, Japanese Jobs/Applicants Ratio, Japanese National CPI, Japanese Overall Household Spending, Japanese Unemployment Rate, Japanese Foreign Bond Investment, Tokyo Core CPI
The US economy rose marginally in the first quarter amid a fall in business investment and exports as the Greenback strengthened, as well as oil prices and harsh winter weather. During the first quarter, non-residential fixed investment dropped 3.4%, compared to 4.7% in the last quarter, while real export slid 7.2% in Q1, down from 4.5% increase in the December quarter of 2014. The US GDP climbed an annualized 0.2%, compared with the 2.2% growth in the fourth quarter of 2014, and against economists' expectations for a 1.0% rate expansion. Yet, one of the main reasons of poor economic growth is export, however, investments in oil and gas drilling tumbled 48.7%. Despite the fact that the economy's growth pace was lacklustre, analysts are predicting strong expansion of the US economy during next quarters as consumer spending and employment are likely to pick up during the year. The IMF had forecast that the US economy would expand 3.1% in 2015, despite the fact that after the Great Recession economy growth in average did not exceed 2.2%.
Meanwhile, consumer confidence unexpectedly dipped in April due to severe weather. The Conference Board's index of consumer sentiment dropped to 95.2, down from upwardly revised 101.4 in the previous month. Elsewhere, the Fed signalled that it could hike interest rates at any meeting, opening the door to the chance of interest rate increase as soon as this summer. Still, many economists continue to assume that the central bank's first rate rise since 2006 would occur only in June, September or December.
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 forward."
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 Unemployment Claims and Tokyo Core CPI
The BoJ has kept its monetary policy unchanged in its April meeting, so the upcoming most important event concerning the Japanese economy is the Tokyo CPI. It is the most important inflation indicator. The figures were stable for three months; however, inflation is expected to drop from 2.2 to around 0.5%. Meanwhile, the US Unemployment Claims are expected to reduce, which is a good sign and should strengthen the US Dollar. Nevertheless, the US showed a lot of worse-than-expected data recently, the pattern might repeat itself today. If the data does not disappoint, we should see the Greenback appreciate against the Yen by the end of the day.
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 to negate this week's losses
On Wednesday, the USD/JPY pair edged higher, despite bearish prospects and weak fundamental data. The Greenback experienced substantial volatility, before settling close to the 119 psychological level. Nonetheless, this obstacle was not overcome, but it is likely do so today. Immediate resistance retains its position around 119.20, although a hike towards the 20-day SMA at 119.42 is also possible. Meanwhile, technical indicators keep giving mixed signals.
Daily chart
Having fallen for two days straight this week, the USD/JPY pair appeared to have regained momentum yesterday. The resistance trend-line was breached, but the Greenback did not overstay its welcome over 119. After a 70-pip loss, some value was regained, but today the US Dollar is still edging closer to the April low of 118.52, from which a rebound should take place.
Hourly chart
Market sentiment remains bullish
Bulls are prevailing over bears, taking up three quarters of the market (75%). The gap between the buy and sell commands narrowed. Now 51% of all orders are to acquire the Buck.
Market sentiment of OANDA's traders slightly weakened, as today 65% of all positions are long (previously 66%). Meanwhile, SAXO Group traders' outlook towards the Greenback worsened as well, as the share of longs lost four percentage points, now taking up 72% of the market.
Spreads (avg, pip) / Trading volume / Volatility
17% of traders expect the US Dollar to cost either between 121.50-123.00 or 123.00-124.50 yen in three months
The mean forecast for July 30 is 120.97. The vast majority of the survey participants (61%) still expect the Greenback to cost more than 120 yen. The most popular choice was divided between 121.50-123.00 price interval and 123.00-124.50, both selected by 17% of traders. The second popular price range, 117.00-118.50, was selected by only 12% of the surveyed.
Compared to the previous week the bearish sentiment strengthened, as now 60% of traders expect the pair to loose, comparing to the 57% of bearish votes in the previous release. As a result, the average median for the pair decreased to 119.1.
Soladood, a trader with a bullish perspective towards the USD/JPY currency pair, suggests that the daily chart shows the pair at the sideways mode and that it is drifting higher from the current level. Another community member, AAARated, expects the Greenback to decline versus the Yen. He said that "the USD/JPY has failed to stay above 121.50 and it stays around the key support level of 118.50-118.66 on the daily chart." AAARated also mentioned that if the pair breaks the support level, it will head downwards to the first support at 117.50.