USD/JPY anchored around 124.00

Source: Dukascopy Bank SA
  • The share of purchase orders decreased from 69 to 56%
  • 71% of all positions are now long, compared to 73% on Thursday
  • Nearest resistance rests around 124.50, represented by the weekly R2 and the Bollinger band
  • The closest support now lies around 123.45, namely the weekly R1 and monthly PP
  • 18% of traders expect the Greenback to cost between 124.50 and 126.00 yen in three months
  • Upcoming events today: US Building Permits, US CPI and Core CPI, US Housing Starts, US Preliminary UoM Consumer Sentiment, FOMC Member Fischer Speech

© Dukascopy Bank SA

The US Dollar experienced rather good performance over Thursday, as it appreciated against most major currencies, with exception against the Aussie. The largest gains were detected against three majors: the Kiwi (0.67%), the Euro (0.50%) and the Swiss Franc (0.47%). However, the Greenback sustained a 0.58% loss versus its Australian counterpart.

The number of Americans who applied for unemployment benefits declined in the week ended July 11, coming in slightly better than expected. Initially jobless claims across the US economy fell to a seasonally adjusted 281,000 last week, down from a revised 296,000 reported in the previous seven-day period. It also marked the 19th consecutive month that claims remained below the 300,000 threshold, indicating improving labour market conditions. The four-week moving average of claims, a better measure of labour market trends as it strips out weekly volatility, rose 3,250 to 282,000 last week.

In the meantime, Fed Chairwoman said Thursday lifting interest rates too soon could threaten the ongoing recovery while waiting too long risks overheating the economy and raising inflation. In her testimony before the Senate Banking Committee, Yellen welcomed the progress in the labour market and the economy, and reiterated those improvements could result in the central bank hiking interest rates this year. Yet, the Chair avoided specifying the timing of the first benchmark rate increase from near zero, but said that the US central bank would raise rates in a "prudent and gradual manner". The Fed has kept its benchmark federal-funds rate near zero since December 2008 to support the economy through the financial crisis and uneven recovery.

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."

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US fundamental data to drive the USD/JPY



There are no data releases concerning the Japanese economy scheduled for today or even for Monday, thus the main focus is set on the US fundamental data. The US Building Permits is forecasted to worsen in the July's report, although the previous two times showed signs of improvement. At the same time, the CPI, which accounts for the majority of overall inflation, is expected to grow at a slower pace, while the Core CPI is likely to improve. Due to the mixed signals, secondary events might have a larger than usual impact on the Cable. The expectation of the Fed rising interest rates also remains in play, hopes for which might be bolstered by FOMC Fischer's Speech at 02:00 PM GMT later today, thus, providing the US currency with another boost.

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 anchored around 124.00

The USD/JPY currency pair did appreciate yesterday, but not as much as anticipated, due to some weak fundamental data. Although the nearest resistance was not reached, the Greenback still managed to stabilise above the 124.00 major level. Today's technical studies give mixed signals, while the Buck is expected to edge closer to the weekly R1 and monthly PP support cluster around 123.45. However, the bullish trend has a chance of being preserved, which would result in reaching yesterday's target around 124.45.


Daily chart
© Dukascopy Bank SA

Although the USD/JPY has been climbing steadily for three consecutive days, unable to breach the possible support trend-line, the pair succeeded in doing so early today. The exchange rate even dropped back under the 124.00 psychological level, but the bullish momentum is likely to be regained later in the day, unless other factors weigh on the US currency.

Hourly chart
© Dukascopy Bank SA


Bulls still prevailing over bears

Bulls retreated for the third day, as 71% of all positions are now long, compared to 73% on Thursday. The share of purchase orders also decreased, from 69 to 56%.

OANDA and SAXO clients retain their bullish perspectives towards the Buck. The share of longs at OANDA slightly declined from 58 to 56%, while the SAXO Bank's sentiment remains unchanged at 59%.















Spreads (avg, pip) / Trading volume / Volatility


18% of traders expect the Greenback to cost between 124.50 and 126.00 yen in three months

© Dukascopy Bank SA

According to the survey conducted between June 17 and July 17, 58% of the participants expect the US Dollar to cost more than 123 yen in three months. However, the mean forecast for October 17 is 123.45. Meanwhile, the 124.50-126.00 price interval received the largest amount of votes, namely 18%, while the second choice shifted to the 126.00-127.50 price range, chosen by 15% of participants.


As the currency cross managed to hover around the same level from Monday to Friday, Dukascopy traders became much more bullish on their future view of pair's development, being that 62.5% of respondents are now waiting the US Dollar to fall in value. The median forecast for Friday of this week slipped to 123.70 from the current trading level.

Aslamhammad, one of the Dukascopy Community members expects the US Dollar to outperform the Yen today. He back up his statement by saying that "currently, Yen is weak and all pairs have been appreciating against, so my sentiment is bullish for USD/JPY on Friday 17th of July." Rokasltu, on the other hand, still assumes the Yen might weigh on the Greenback. He believes that as the Yen rebounds, the USD/JPY pair will move down towards an important 120 mark, as a deeper correction is possible this week.

© Dukascopy Bank SA

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