- Purchase orders now account for 67% of the market
- Today 60% of all positions are long, compared to 56% yesterday
- 18% 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 located around 119.40, represented by 100-day SMA
- Upcoming events: US Empire State Manufacturing Index, US Capacity Utilization Rate, US Industrial Production, US Preliminary UoM Consumer Sentiment
American unemployment claims unexpectedly dropped 1,000 to 264,000 in the week, below expectations of 272,000. Lower level of jobless claims showed that staffing remains stable and lower economic growth was due to worse weather conditions, stronger Dollar and port dispute. For ten consecutive weeks jobless claims remained below 300,000. Furthermore, the average number of claims during last four weeks pulled down to 271,750, the lowest level since April 2000, while unemployment rate declined to 5.4%, marking the lowest level in seven years. Meanwhile, the number of people receiving benefits remained 2.23 million. The very low levels of unemployment benefit applications is a reassuring sign that employers are not cutting staff, even though economic growth has faltered this year. Growth is looking sluggish in the second quarter as well, as consumers spent cautiously in April. Some economists forecast growth may be just an annualized 2% in the April-June quarter. Most still expect growth will accelerate from that level in the second half of the year.
Elsewhere, the US PPI, a bellwether of consumer inflation, sank more-than-expected to -0.4% in April, down from 0.2% in March, while analysts had forecasted a 0.1% gain amid plunged retailers and wholesalers profit margins. Some 70% of the decrease in PPI was due to a 0.7% fall in final demand goods and a 0.1% decline in final demand service.
Sean Yokota, head of Asia Strategy at SEB, talks about the current situation in Japan. He said that "if you look at Japan's public debt, which is about 243% of GDP, which is also one of the largest in the world." The economist comments that the BoJ needs to get the debt down before all the baby boomers retire, so they need to go through some fiscal consolidation, whether through tax hikes or through spending cuts. He also mentioned that such measures put Japan into recession, but he thinks that it also gave a bit of confidence to people; that this time when you increase the taxes, it does hit you short-term, but you can come out of the recession. Moreover, the Japanese economy is still doing relatively O.K. and the equity markets are still pretty high.
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 Industrial Production
Earlier today the head of Japan's Central Bank held a press conference, where he mainly addressed the topic of QQE in Japan and its effect on the economy. However, Kuroda's statement had little influence on the Yen overall. Nevertheless, a number of data releases concerning the US are due later today. Although the Consumer Sentiment is a high-impact event, changes are expected to be minor, as well as the impact. Industrial Production, on the other hand, is likely to show growth again, which should strengthen the USD/JPY currency pair.
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 gets back on track
Despite expectations, the US Dollar managed to appreciate against the Yen yesterday. Even though the USD/JPY crossed the 119 level during trading hours, ultimately, the pair still edged up, but only three pips. The Greenback is likely to grow again today, as technical studies are bolstering the positive scenario. The nearest resistance is located at 119.40, namely the 100-day SMA, but a surge even towards the 55-day SMA at 119.74 is probable outcome.
Daily chart
Although the Greenback breached the 119 psychological level, it did not stay in that area for long. The USD/JPY appears to be regaining the bullish momentum, edging closer to the 200-hour SMA. If the US Dollar manages to stabilise above that 119.70 area, further growth can be expected at a more solid pace.
Hourly chart
Bullish sentiment strengthens further
Bullish traders keep growing in numbers, as today 60% of all positions are long, compared to 56% yesterday. Meanwhile, the share of buy commands added 11 percentage points. Purchase orders now account for 67% of the market.
Market sentiment of OANDA Group improved again, since 72% of traders are now long the Buck (previously 69%). SAXO Group traders' outlook towards the Greenback slightly worsened, with the share of longs losing one percentage points, now taking up 77% of the market.
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 15 is 121.07. The vast majority of the survey participants (62%) 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 18% of traders. The second popular price range, 121.50-123.00, is 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.