- Sell orders now take up the majority of the market, namely 51%
- The share of bulls returned to its Thursday's level of 74%
- Nearest resistance rests around 122.70, represented by the 20 and 55-day SMAs
- The closest support now lies at 121.94, namely the weekly PP
- 21% of traders expect the Greenback to cost between 124.50 and 126.00 yen in three months
- Upcoming events today: US Monthly Budget Statement
The US Dollar was seen declining against some major currencies since Friday, as well as advancing against the others. The three most significant losses were versus the Euro (1.09%), the Swissie (0.96%) and the Sterling (0.89%). The Buck also appreciated 1.19% against the Yen and 0.33% versus the Kiwi, while remaining relatively unchanged against the Aussie, adding 0.01%.
The number of people applying for unemployment benefits rose more than expected in the week ended 4 July. However, the increase was likely due to temporary auto plant shutdowns rather than underlying weakness in the labour market. US initial jobless claims rose by 15,000 to 297,000 last week, according to the Labor Department, hitting the highest level since 327,000 applications were filed in the last week of February. Even with the recent rises, benefit applications, which are a proxy for layoffs, remain at low levels indicating a strengthening labour market that has enjoyed solid employment gains. The four-week moving average for claims, which smooths out the week-to-week volatility, climbed to 279,500, up slightly from 275,000 a week earlier. It was the highest level for the four-week average since early May. At the same time continued claims rose 69,000 to 2.334 million in the week ended June 27, the Labor Department added.
The government reported last week that the unemployment rate fell to a seven-year low of 5.3% in June, while employers added 223,000 jobs. It was the lowest jobless rate since April 2008, when it stood at 5.0%. Even though unemployment has declined, other labour market measures have not performed as well, a fact that Fed Chair Janet Yellen often refers to when explaining why the Fed has not yet started raising interest rates.
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 Federal Budget Balance
With the Japanese Revised Industrial Production meeting expectations and the Tertiary Industrial Activity showing worse-than-expected figure, the Yen weakened versus the US Dollar during the Asian trade. The only other event scheduled today is the US Federal Budget Balance, although it is not likely to have a serious impact on the market price. The Budget is expected to indicate a surplus, but the figure will doubtfully be as high as the forecast, meaning the Greenback should feel some pressure by the soft data.
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 struggles to breach resistance cluster
The USD/JPY currency pair almost met expectations, as it appreciated on Friday and negated weekly losses. However, the pair slightly overperformed, as it closed trade at 122.76, rather than at 122.70. Today, due to a trade gap, the US Dollar remains under the Friday's resistance cluster, which is likely not to only limit the gains, but cause the tide to turn as well. Meanwhile, technical studies retain their bearish signals, suggesting the Greenback is to decline towards 122.00 against the Yen.Daily chart
The USD/JPY appears to be trading in a sharply ascending channel. The price movements are rather gradual, meaning that the pair could break out of the pattern at any time. Right now the Greenback is edging closer to the upper border of the channel, where it is expected to meet resistance and bounce back down.
Hourly chart
Bulls keep dominating the market
The share of bulls returned to its Thursday's level of 74%, whereas the sell orders now take up the majority of the market, namely 51%.
OANDA and SAXO clients retain their bullish perspectives towards the Buck. The share of longs at OANDA edged down from 61 to 59%, while the SAXO Bank's sentiment weakened even more, with 59% of their traders holding long positions, compared to 68% previously.
Spreads (avg, pip) / Trading volume / Volatility
21% of traders expect the Greenback to cost between 124.50 and 126.00 yen in three months
According to the survey conducted between June 13 and July 13, 62% of the participants expect the US Dollar to cost more than 123 yen in three months. However, the mean forecast for October 13 is 123.95. Meanwhile, the 124.50-126.00 price interval received the largest amount of votes, namely 21%, while the second choice is now taken by the 120.00-121.50 price range, chosen by 15% of participants.