- Buy orders now take up 52% of the market
- Market sentiment remains bullish at 54%
- Closest resistance is located at 125.07, the weekly PP
- From below the price is supported by the weekly S1 at 124.30
- 20% of traders assume the US Dollar will cost between 126 and 127.5 yen in three months
- Upcoming events today: US JOLTS Job Openings, Japanese Core Machinery Orders
Many Federal Reserve officials feel that the economic data is not strong enough to justify raising interest rates this month when they meet on 16-17 June. In addition to that, the International Monetary Fund asked the Fed to hold off raising interest rates until the first half of 2016 due of disappointing growth and a lack of inflation.
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."
US JOLTS Job Openings
As usual, there will be no significant releases concerning the Japanese economy today, but early morning tomorrow there will be a data release on the Japanese Core Machinery Orders, which is expected to show weak figures and pressure the Yen to the downside. However, later today there will be a data release concerning the US Job Openings. This particular release can impact the currency market due to the Job Openings indicating the health of the country's economy. The Number of new jobs in May is expected to increase, and last week's Non-Farm Payrolls data is only bolstering the possibility of today's data to exceed the expectations. We should see the American Dollar advance against the Yen for the next two days.
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 attempts to recover from Monday's plunge
Yesterday the US Dollar suffered substantial losses unexpectedly. The weekly PP failed to stop the fall and, as a result, the USD/JPY fell back under the 125 level. Moreover, downside volatility even stretched out to the weekly S1 at 124.30, but was unable to breach the second support. The weekly S1 has prevented the given pair from falling down again today, thus, a correction is likely to take place today, with the weekly PP now acting as an immediate resistance at 125.07. Meanwhile, technical indicators keep giving bullish signals.
Daily chart
As the US Dollar surprisingly fell back under the 125 level, the 200-hour SMA still managed to limit the losses and cause the USD/JPY to slightly bounce back. Even in the morning hours today, the SMA is preventing the given pair from falling deeper. Ultimately, we should see a rebound today and a rally back above 125..
Hourly chart
Bullish sentiment unchanged
For the fifth time in a row, market sentiment remains bullish at 54%. The share of buy orders, however, edged 13 percentage points closer to the equilibrium now taking up 52% of the market.
The market participants at other brokers appear to be less bullish on USD/JPY. The SAXO Bank traders' sentiment remained unchanged, with 52% of their positions still being long, whereas OANDA traders' bullish sentiment is slightly weaker than before, at 54%.
Spreads (avg, pip) / Trading volume / Volatility
20% of traders assume the US Dollar will cost between 126 and 127.5 yen in three months
The mean forecast for September 8 is 122.59, however, the vast majority (70%) still expect the US Dollar to cost more than 120 yen within a three-month period. The most popular price range is between 126.00 and 127.50 yen, voted for by 20% of participants. The second most popular choice is 123.00-124.50 price intervals, selected by 16% of the surveyed.