- The share of buy orders shifted from 49 to 58%
- 64% of traders now hold long positions (previously 60%)
- Nearest resistance rests around 123.23, represented by the weekly PP
- There still seems to be relatively strong demand at 122.53
- 20% of traders expect the Greenback to cost between 126 and 127.5 yen in three months
- Upcoming events today: US Existing Home Sales
The Greenback experienced mixed performance over Friday. The Buck lost 0.20% and 0.46% against the Yen and the Swiss Franc, respectively. Nonetheless, gains of 0.37% were registered against the Aussie, 0.36% versus the Loonie and 0.24% versus the Kiwi. Furthermore, the US Dollar remained relatively unchanged against the Euro, adding 0.08%, and the Sterling, gaining 0.02%.
San Francisco Federal Reserve President John Williams believes that the US central bank should hike interest rates from near-zero twice this year if economic data meet expectations, highlighting that a delay of a hike for too long poses risks to the world's number one economy. However, Williams and other members of the Fed's board continue to be in a wait-and-see mode, stressing that a rate decision is dependent on economic data including jobs and inflation. Fed policy makers have for some time projected that inflation that for years has stayed below the Fed's 2% target will climb as unemployment declines and the labour market tightens. Williams reiterated that the economy probably expanded around 1.5% in the first quarter, rather than contracting as government data has indicated. Williams further expected that GDP will grow at about a 2.75% annual rate for the next several quarters before slowing to a more sustainable pace next year. Unemployment will likely slide to 5.2% by the end of the year, and stronger wage growth is already evident. Against that background, inflation is likely to return to 2% by next year, Williams said.
Fed officials ended their policy-setting meeting last week with a decision to keep rates on hold at zero, where they have been since December 2008.
Sean Yokota, head of Asia Strategy at SEB 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. Overall, Yokota reckons that 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 Existing Home Sales
At 14:00 GMT there will be a data release on the US Existing Home sales. Even though the number of sold buildings is expected to rise, compared to the preceding figure, historical data shows that this current data tended to disappoint, with exception on April's release. The Home Resales data will be the main factor to influence the USD/JPY 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.
Steve Lucas, technical analyst at 3CANALYSIS, gives their perspectives on the USD/JPY currency pair. "We have persistently been bullish of USD/JPY, but in the very short-term we think there will be a pullback", he said. Steve explained their view by mentioning that since the pair posted the 12.5 year high in June, last week put in a bearish reversal candle, which is a negative signal. "We also think that the deception out there is that the Fed is going to be a little easier on raising interest rates and people are going to be a bit cautious and a bit sensible and take the money off the table", the analyst added.
USD/JPY keeps finding support at 122.50
Last Friday the USD/JPY currency pair suffered more losses rather than edging higher. The pair failed to hold above the 123 major level and inched lower to the monthly PP. Ultimately, the Greenback bounced back from the monthly PP and stabilised at 122.65. Although the Buck is expected to rally today, risks of sustaining more losses exist. The nearest resistance rests at 123.23, represented by the weekly PP, while the monthly one keeps supporting the pair from below. Meanwhile, technical indicators are showing mixed signs, unable to confirm either outcome.Daily chart
After sustaining losses on Friday, the USD/JPY began consolidating up until today. The Greenback experienced a boost and rose above the 123 level, but with the 200-hour SMA just over the corner. The SMA is likely to limit gains today or even push the given pair back down and perhaps even under the 123 major level once more.
Hourly chart
Bullish sentiment keeps strengthening
Bulls keep gaining numbers, as 64% of traders now hold long positions (previously 60%). The share of buy orders shifted from 49 to 58%.
OANDA and SAXO clients retain their bullish perspectives towards the Buck. The share of longs at OANDA declined from 60 to 59%, while the SAXO Bank's sentiment slightly improved, adding two percentage points up to 69%.
Spreads (avg, pip) / Trading volume / Volatility
20% of traders expect the Greenback to cost between 126 and 127.5 yen in three months
According to the survey conducted between May 22 and June 22, 70% of the participants expect the US Dollar to cost more than 123 yen in three months. However, the mean forecast for September 22 is 125.01. Meanwhile, the 126.00-127.50 price interval received the largest amount votes, namely 20%.