- The buy commands now take up 65% of the market
- Market sentiment remains bullish at 72%
- 17% of traders expect the US Dollar to cost between 121.50 and 123.00 yen in three months
- Nearest resistance rests around 119.60, represented by the monthly PP, while closest support lies at 119.43, the 20-day SMA
- Upcoming events: US Markit Manufacturing PMI, US Construction Spending, US ISM Prices Paid, US Reuters/Michigan Consumer Sentiment, FOMC Member Williams Speech
The number of Americans applying for unemployment benefits declined last week to the lowest level in 15 years, suggesting healthy job creation. Initial jobless claims, a proxy for layoffs across the country, plunged by 34,000 to a seasonally adjusted 262,000 in the week ended April 25, according to the Labor Department, marking the lowest level for claims since April 15, 2000. Analysts, however, had expected the gauge to climb to 290,000 in the week. Continuing claims for the week ending April 11 came in at 2.253 million, compared with last week's revised 2.327 million. The unemployment rate in March was 5.5%, down from 6.6% a year earlier and 7.5% in March 2013.
A separate report showed US consumer spending rose in March, with purchases increasing 0.4%, the biggest climb since November. Household spending is expected to revive growth after decline in business investment and exports caused the world's number one economy to considerable slow in the first quarter of 2015. Meanwhile the core PCE Price Index ticked up by 0.1% in March from the previous month, when the gauge booked the 0.1% increase. From a year earlier, the core index rose 1.3%, against economists' expectations for a 1.4% print. The February reading was revised downwards by a notch to 1.3%, meaning that the core inflation rate has remained unchanged for the last four months indicating the largest shortfall to the Fed's 2% objective in about a year.
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 Markit Manufacturing PMI
The Japanese Cash Earnings have already showed worse-than-expected figures, while he most important event today, concerning the USD/JPY pair, is the US Markit Manufacturing PMI. The reading in March showed a decline for the first time in 14 months. The fall is considered to be a setback and the figures are expected to improve today. Unless the US fundamentals disappoint with very poor data, the Buck is to keep rising against the Yen.
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 keeps rising
After substantial volatility, the USD/JPY pair surged above the 119 level once again. Initial resistance cluster around 119.20 failed to prevent the pair from gaining value; however, the 20-day SMA coped with this issue without difficulty. Furthermore, the resistance cluster around 119.85 was tested, whereas attempts to reclaim it will be made today. Technical indicators are showing mixed signs in the shorter timeframes, while in the longer ones signals remain bullish. The US Dollar is likely to extend the rally today, with the monthly PP acting as the immediate resistance; however, we might see the Greenback close around 120.
Daily chart
As was anticipated, after the USD/JPY pair reached the April low at 118.52, a rebound took place. Moreover, the 119 level was crossed the rally even reached 119.90. In the near future we can see the Greenback retaking last week's high, which is just over the 120 psychological level.
Hourly chart
Market sentiment remains bullish
Although not as strong as yesterday, but market sentiment remains bullish at 72%. The number of buy orders added 14 percentage points. The commands now take up 65% of the market.
Market sentiment of OANDA's traders slightly weakened, as today 64% of all positions are long (previously 65%). Meanwhile, SAXO Group traders' outlook towards the Greenback worsened as well, as the share of longs lost one percentage point, now taking up 71% of the market.
Spreads (avg, pip) / Trading volume / Volatility
17% of traders expect the US Dollar to cost between 121.50 and 123.00 yen in three months
The mean forecast for August 1 is 120.88. The vast majority of the survey participants (61%) still expect the Greenback to cost more than 120 yen. The most popular choice was 121.50-123.00 price interval, selected by 17% of traders. The second popular price range, 123.00-124.50, was selected by 15% 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.