- The share of commands to purchase to the Buck surged from 62 to 80%
- Bullish market sentiment lost one more percentage point, down to 55%
- Closest resistance is the cluster around 124.14, represented by the 2007 high
- From below the price is supported by the Bollinger band at 123.52
- 66% of traders see USD/JPY above 120 yen in three months
- Upcoming events today: G7 Meeting, FOMC Member Williams Speech, US Unemployment Claims, US Pending Home Sales, US Crude Oil Inventories
Another FOMC voting member, president of the Richmond Federal Reserve Bank, Jeffrey Lacker, in his Tuesday's speech said that he has not still decided on his voting on June's FOMC meeting about increasing the Fed's interest rate that has been maintained at a record low of 0% to 0.25% since December 2008. However, with inflation firming and the economy recovering from a soft growth in the first quarter, there may still be a case for hiking interest rates next month, he said. Lacker also addressed Lacker two main problems in the US financial system: namely, the Fed's emergency lending powers and Title II of the Wall Street Reform Act of 2010.
Sean Yokota, head of Asia Strategy at SEB, 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."
G7 Meeting and US Jobless Claims
The only event that concerns both, the Japanese and US economy is the G7 Meeting today, where the leaders will discuss the global economic growth as well as foreign, security and development policies. However, the US Unemployment Claims are likely to decrease, while the Retail Sales in Japan have already shown growth, but at a slower rate than anticipated. Unless the US fundamentals turn out to be worse-than-expected, we should see the USD/JPY rise again today.
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," Thieliant said.
USD/JPY reaches 13-year high
The Greenback keeps appreciating against the Yen for the second week in a row. The nearest resistance cluster was easily breached, but the USD/JPY currency pair struggled to stay above the 124 area. Technical indicators retain their bullish signs, suggesting further rally today. The nearest resistance is the 124.14 level, although we might see a surge up to 124.58 if the fundamentals do not disappoint. Meanwhile, the Bollinger band is providing support and is not allowing the Buck to climb down.
Daily chart
The Greenback was advancing against the Japanese Yen through all of May. Moreover, the pair reached the highest level in 13 years, which seemed to have forced the US Dollar to bounce back. Although the US currency is suffering losses and fell back under 124, the prospect remains bullish.
Hourly chart
Bullish sentiment keeps weakening
For the fourth consecutive day bullish market sentiment lost one more percentage point, down to 55%. The share of commands to purchase to the Buck surged from 62 to 80%.
The market participants at other brokers appear to be more bullish on USD/JPY. Now 55% of OANDA's traders are long the Buck (up from 53%). SAXO Bank traders are even more optimistic towards the Greenback, being that 57% of their positions are still long.
Spreads (avg, pip) / Trading volume / Volatility
Two thirds see USD/JPY above 120 yen in three months
The surveyed traders are mostly bullish on the Dollar. According to the latest data, 66% of them expect the US currency to cost more than 120 yen after three months. Nevertheless, the largest concentration of answers lies between 123.00 and 124.50, namely 20% them. Meanwhile, the average of the three-month forecasts collected between Apr 28 and May 28 is 121.16.
The sentiment among Dukascopy traders is rather strong for this currency pair, as the average expectation for the end of this week is located around 119.9 level, while 66% of all votes are currently bullish.
A trader with a bullish outlook towards the USD/JPY, rokasltu, mentioned that the pair moved in a strong bullish mode in the last days. He also said that "strong bullish daily candles and the weekly close near 2014-2015 high is so important", suggesting that this indicates that the pair is to have a strong up-trend in the near future. However, khalidamassi, a strider with a bearish outlook, thinks that the Greenbakc advanced too fast against the Yen, and that a correction should take place around 120.