- Buy orders now take up 56% of the market
- 56% of all positions are long
- 19% of traders expect the US Dollar to cost between 123.00 and 124.50 yen in three months
- The closest support rests at 119.07, namely the weekly S1, while the nearest resistance is still located around 119.38, represented by 100-day SMA
- Upcoming events: US PPI and Core PPI, US Unemployment Claims
US retail sales remained unchanged last month as households refrained from lavish spending on automobiles and other big-ticket items, pointing to the US economy's struggle to make a strong bounce back after barely growing in the beginning of the year. In March, retail sales rose 1.1%, marking an upward revision from previously reported 0.9% rise. Core retail sales, which exclude automobiles, inched higher by 0.1% in the reported month. Retail sales are a key barometer for overall consumer spending, which makes up around two-thirds of US economic output. During the first quarter, households remained cautious due to bad weather and a broader economic slowdown. The government reported last month that GDP grew at a 0.2% annual pace in the first three months of the year. Trade and wholesale inventory data published last week, however, suggested the economy actually contracted. The government will release its GDP revision later this month.
A pickup in consumer spending would give the Fed confidence that a soft first-quarter economic performance was temporary, rather than a sign of some underlying problems. Other recent economic data suggests the world's number one economy is returning to healthier growth rates. Employers added 223,000 jobs in April, the Labor Department said, a rebound after March's gain of only 85,000, the worst monthly performance in almost three years.
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 and PPI
The US PPI is likely to drop, while the number of people claiming unemployment insurance is expected to increase. Both events are to have significant impact on the US Dollar and both are expected to show worsened figures; hence, we should expect further weakness in USD/JPY.
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 falling under 119
On Wednesday, the US Dollar suffered heavy losses against the Yen. All three closest supports have been easily breached, as the pair nearly reached 119. The weekly S1 managed to prevent further plunge, stabilising the USD/JPY at 119.18. More weakness is expected today; the Greenback is likely to cross the 119 level and settled around 118.80. Meanwhile, technical indicators retain bullish signals, but proved to be unreliable in the past couple of days.
Daily chart
The US Dollar negated all last week's gains yesterday, as piercing the 200-hour SMA pushed the pair lower. However, the last week's low has stopped the USD/JPY from falling further, for now. Once the 119 psychological level is breached, the next target is 118.50, April 30 low..
Hourly chart
Bullish sentiment unchanged
For the third consecutive day market sentiment remains unchanged, with 56% of all positions being long. The number of buy orders lost two percentage points, as they now take up 56% of the market.
Market sentiment of OANDA Group improved, since 69% of traders are now long the Buck (previously 60%). SAXO Group traders' outlook towards the Greenback became more positive, with the share of longs adding ten percentage points, now taking up 78% of the market.
Spreads (avg, pip) / Trading volume / Volatility
19% of traders expect the US Dollar to cost between 123.00 and 124.50 yen in three months
The mean forecast for August 14 is 121.14. 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 between 123.00 and 124.50 yen, selected by 19% of traders. The second popular price range, 121.50-123.00, chosen by 13% of the surveyed.
This week's overall sentiment for the USD/JPY pair is still bearish, as 63.6% of all traders are supporting the negative case for the pair. Slightly more than 28% of traders expect the pair to close above the 119.2 level towards the end of present working week.
Aslamhammad, a trader with the bullish outlook towards the USD/JPY, expects the pair to rise back to 122, as the price is holding steady above 119 level. Meanwhile, another community member and a trader with a bearish outlook, bharatholsa, suggests that the US Dollar will weaken against the Yen due to soft economic data in the US recently. He also mentioned that the NFP is more likely to be negative in line with ADP.