- The share of buy commands increased from 52 to 67%
- Today one percentage point less (56%) of all positions are long
- 18% of traders expect the US Dollar to cost between 123.00 and 124.50 yen in three months
- The closest support lies at 119.391, namely the 20-day SMA, while the nearest resistance is located around 119.60, represented by the monthly and weekly PPs
- Upcoming events: US Initial and Continuing Jobless Claims
US private sector created fewer jobs than expected in April, adding to recent soft fundamentals from the world's number one economy. US private employers added 169,000 jobs last month, the fewest since January 2014 and considerably below economists' expectations. March's private payrolls were revised down to an increase of 175,000 jobs from the previously reported 189,000. The ADP figures come ahead of the Labor Department's more comprehensive non-farm payrolls report due to be released on Friday, which includes both public and private-sector employment. Economists expect total US employment to have grown by 224,000 jobs last month, up from 126,000 in March. The unemployment rate is predicted to decline to 5.4% from 5.5%. Meanwhile, the cost of labour in the US increased at an annualized rate of 5% in the first quarter of the year, compared with the 4.5% advance expected by market analysts.
The US Federal Reserve should not raise interest rates this year amid soft economic data in the first quarter, Minneapolis Federal Reserve Bank President Narayana Kocherlakota reiterated, pointing to very low inflation rates and still fragile economic growth. Yet, Kocherlakota is a non-voting member on the Fed's policy-setting Federal Open Market Committee this 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 Jobless Claims
Today there will be no relevant data releases concerning the Japanese economy. Nonetheless, the US Jobless Claims report is the most significant event today. The number of people applying for unemployment insurance is expected to increase. Hence, it indicates that overall economic health is worsening and, as a result, the US Dollar is to fall under pressure.
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 on the verge of breaking under 119
The Greenback suffered heavy losses against the Yen yesterday. The support cluster around 119.64 failed to stop the fall, while the 20-day SMA succeeded. As a result, the USD/JPY pair stabilised at 119.39, after having tested the 100-day SMA at 119.24. The previous support cluster now acts as a resistance, although further weakness is expected. Poor fundamental figures are likely to push the US Dollar further down to around 119.00 level, which is also backed by the weekly S1. Meanwhile, technical studies retain their mixed signals.
Daily chart
On the hourly chart we can see a straight two-day decline of the USD/JPY pair. Amid weak fundamental data, the 200-hour SMA was pierced yesterday. Nonetheless, the pair began to consolidate around the SMA, but should fall deeper down by the end of the day. Perhaps the support around 119.00 will be strong enough for the Greenback to bounce back up.
Hourly chart
Market sentiment weaker, but remains bullish
Slightly less traders now have a positive outlook towards the USD/JPY, as one percentage point less (56%) of all positions are long. The share of buy commands, on the other hand, increased from 52 to 67%.
Market sentiment of OANDA Group has even more bulls today, as 60% of traders are now long the Buck. Meanwhile, SAXO Group traders' outlook towards the Greenback also improved, as the 74% of all positions are long.
Spreads (avg, pip) / Trading volume / Volatility
18% of traders expect the US Dollar to cost between 123.00 and 124.50 yen in three months
The mean forecast for August 7 is 121.13. The vast majority of the survey participants (63%) expect the US Dollar to cost more than 120 yen. The most popular price interval is divided 123.00 and 124.50 yen, selected by 19% of traders. The second popular price range, 121.50-123.00, chosen by 14% of the surveyed.
While closing on a positive note at the 120.20 level on Friday, the pair is estimated to calm slightly down this week, possibly falling back below 120 but remaining largely inactive. Still, the majority of Dukascopy Community members prefer a positive case for the Greenback, namely in two thirds of all the cases.
Tommaso, a trader with a bullish outlook towards the USD/JPY currency pair, says that the Yen has been strongly devaluing from July 2014 to November 2014. Tommaso also mentioned that "there has been a period of "controlled" oscillations of the pair, but it seems that the poor results obtained require another step of devaluation. His prospect is that the pair could reach the quite 121 steadily during this week. At the same time, Gereltod, another community member, assumes the USD/JPY is forming a wedge and that it will breakout the formation on the bearish side, or that it could continue ranging by bouncing off a support level at 118.50. Nevertheless, Gereltod mentioned that "even if it bounces off the support level, I believe the pair will plunge through it eventually".