- Buy commands now take up 51% of the market
- Market sentiment remains bullish at 69% (previously 73%)
- Nearest resistance rests around 123.24, represented by the 20-day SMA
- The closest support now lies at 123.02, namely the weekly PP
- 19% of traders expect the Greenback to cost either between 126 and 127.5 or between 124.5 and 126 yen in three months
- Upcoming events today: US Non-Farm Employment Change, US Unemployment Rate, US Average Hourly Earnings, US Jobless Claims, US Factory Orders
The US Dollar mostly suffered losses on Thursday, with exception against the Kiwi and the Aussie, where the Buck added 0.19% and 0.18%, respectively. Substantial losses of 0.52% were registered against the Swissie, following with with 0.40% versus the Loonie and 0.28% versus the Euro. The Greenback also remained relatively unchanged versus the Sterling, as it gained 0.05%, and the Yen, where the US currency lost only 0.08%.
US private employers created more jobs than expected in June, indicating further improvement in the labour market, which may justify US interest rate hike later this year. According to the payroll firm ADP, US private sector added 237,000, following the revised 203,000 in May and overshooting economists' expectations for an upturn to 218,000. The ADP figures are released prior to the US Labor Department's more comprehensive non-farm payrolls report on Thursday, which includes both public and private-sector employment. Economists predict total US employment to have increased by 230,000 jobs in June, down from May's 280,000 gain. The unemployment rate was expected to slide to the lowest level in seven years of 5.4% from 5.5 American employers continued to add more than 200,000 jobs for a third consecutive month in June, while the US unemployment rate declined more than expected. US non-farm payrolls rose by 223,000 in June, following the downwardly revised 254,000 a month earlier, according to the Labor Department. The jobless rate slid to 5.3%, down from 5.5% the prior month, marking the lowest rate since April 2008. Nevertheless, many analysts continue to criticize the figure for not objectively reflecting the real picture of the labour market. The real unemployment rate was 10.5%, according to an alternative reading known as underemployment level or U6. It stood at 10.8% in May.
Meanwhile, the number of Americans participating in the labour force dropped to 62.6% in June from 62.9% in the preceding month, reaching the lowest level since 1977. Average hourly earnings of private-sector workers remained unchanged last month at $24.95. From a year earlier, wages rose 2%, almost in line with wage gains for much of the current recovery. The mixed data comes as the US economy could face a number of headwinds later in the year. The Greek debt crisis could derail growth in the rest of Europe and even impact US financial markets. The combination of easy-money policies by foreign central banks and investors' confidence in the US has caused the value of the Dollar to soar over the past year.
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 ISM Non-Manufacturing PMI
No relevant data concerning the Japanese Yen will be available, while there is also a bank holiday in the US today. The current situation with Greece could drive the market sideways, but on Monday, the US ISM Non-Manufacturing will be one of the main market movers, as it's figures will determine the behaviour of all US Dollar crosses.
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 trades in limbo; risks edging lower
Although the US Dollar attempted to appreciate against the Yen yesterday, it still suffered losses and declined towards the weekly PP near the 123.00 major level. Due to lack of movers, the USD/JPY is likely to remain flat today and remain within the borders of the weekly PP and 20-day SMA. Nevertheless, risks of edging lower exist and the pair could reach as low as 122.40 by the end of the day, as technical studies are showing bearish signals in the daily timeframe.Daily chart
Even though the USD/JPY was steadily climbing up, the poor fundamental data pushed the pair back down yesterday. As a result, the 200-hour SMA was crossed to the downside again; however, the Greenback remained above the 123.00 major level. According to the hourly chart, the consolidation is likely to last, as the 200-hour SMA will prevent any rally attempts today.
Hourly chart
Bulls keep dominating the market
Although not as strong as yesterday, but market sentiment remains bullish at 69% (previously 73%). The number of buy orders lost ten percentage points; the commands now take up 51% of the market.
OANDA and SAXO clients retain their bullish perspectives towards the Buck. The share of longs at OANDA, however, edged down from 60 to 56%, while the SAXO Bank's sentiment slightly weakened as well, as 69% of their traders hold long positions, compared to 73% yesterday.
Spreads (avg, pip) / Trading volume / Volatility
19% of traders expect the Greenback to cost either between 126 and 127.5 or between 124.5 and 126 yen in three months
According to the survey conducted between June 03 and July 03, 66% of the participants expect the US Dollar to cost more than 123 yen in three months. However, the mean forecast for October 03 is 124.72. Meanwhile, the 126.00-127.50 and 124.50-126.00 price intervals both received the largest amount of votes, namely 19%, while the second choice is now taken by the 120.00-121.50 price range, chosen by 11% of participants.
Community Forecasts
The majority of traders expect the US Dollar to edge lower against the Yen. Khalidamassi, one of those traders, commented that the "USD/JPY moved strong up last week towards 124, that is good for pair, but the bad thing is that the pair is unable to clearly break and close above last week's high, so USD/JPY is still seen to be vulnerable up and down next week". However, aslamhammad, a trader with a bearish outlook towards the Greenback, expects the pair to go up around 124-125 yen, as he expects the non-farm employment change to be better-than-expected.