- The share of commands to acquire the Greenback takes up 71% of the market
- 70% of traders have a positive outlook towards the Buck
- Immediate resistance is represented by the Bollinger band at 124.61
- The closest support is located around 123.85, namely weekly PP and 20-day SMA
- 21% of traders expect the Greenback to cost between 124.50 and 126.00 yen in three months
- Upcoming events today: US Core PCE Price Index, US Personal Spending & Income, US ISM Manufacturing PMI, US Construction Spending, FOMC Member Powell Speech, BoJ Monetary Base
The Greenback appreciated 0.92% against the Loonie and 0.42% versus the Kiwi, while suffering losses against other major peers. The Buck lost the most versus the Euro, namely 0.25%, following with a 0.12% decline against the Sterling and a 0.11% against the Swiss Franc. However, the US Dollar remained relatively unchanged against the Aussie (-0.03%) and the Yen (-0.02%).
US labour costs rose at the slowest pace in 33 years in the second quarter on lacklustre gains in the private sector, putting a September interest rate increase into question. US workers' compensation rose a mere 0.2% in the April-June period, below economists' forecast for a 0.6% gain, and following the 0.7% increase in the first quarter. In annual terms, the employment cost index climbed 2%, compared with 2.6% recorded in the preceding three-month period. The Fed is closely watching wage figures as it moves closer to lifting interest rates from near-zero. An acceleration in wages would signal the labour market is finally close to healthy, and could urge the Fed to act sooner rather than later to avoid an overheating economy. However, the latest slowdown suggests slack remains in the jobs market and could bolster the case for officials to wait longer to raise rates.
A separate report showed that US consumer morale declined in July as Americans' expectations worsened to the lowest level in eight months. According to the University of Michigan, the final index of consumer sentiment dropped to 93.1, down from 96.1 in June. Nevertheless, the barometer has held above 90 from the eight consecutive months, the longest such streak since a 17-month period ended in early 2005.
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 Manufacturing PMI
Although a vast amount of data releases from the US side is due today, the most attention should be paid to the US ISM Manufacturing PMI. The PMI is expected to remain above the 50.0 mark, thus, indicating industry expansion; however, the US PMI is forecasted to show no changes in the July's release. Even if the US PMI surprises with signs of growth, focus should not be drawn away from other fundamental data, such as the US Personal Spending. The Personal Spending is forecasted to deteriorate, and along with other worse-than-expected data could weigh on the Greenback. At the end of the day, the BoJ is to release the Monetary Base data, which could turn the pair's tide before prices close.
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 remain above 124.00
Although the USD/JPY reached the expected daily low on Friday, the pair still stabilised at 123.85. However, some of Friday's losses were erased over the weekend, which resulted in the Buck resuming trade above the 124.00 level. Today the US currency is expected to inch higher, as the weekly PP and 20-day SMA are providing support around 123.85, while immediate resistance is located too far up and will doubtfully be reached. Furthermore, technical indicators are now showing mixed signals, suggesting the pair is to remain flat.Daily chart
Not only did the US Dollar bounce back under 124.00 from the resistance, but it even pierced the 200-hour SMA and reached 123.60. Although the bullish momentum was then restored and even lasted through the weekend, the 124.00 major level might not be retaken for long. The Buck is expected to keep climbing slowly in the morning hours, but risks of plunging back towards the SMA persist, especially if the fundamental data disappoints.
Hourly chart
Bulls still prevailing over bears
OANDA and SAXO clients retain their bullish perspectives towards the Buck. The share of bulls at OANDA slightly improved from 57 to 59%, whereas 64% of SAXO Group clients retain a positive outlook towards the Greenback, up from 61%.
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 July 03 and August 03, 66% of the participants expect the US Dollar to cost more than 123 yen in three months. However, the mean forecast for November 03 is 124.02. Meanwhile, the 124.50-126.00 price interval received the largest amount of votes, chosen by 21% of all poll participants, while the second largest choices, both selected by 13% of the surveyed, imply that the US Dollar will cost either between 117.00 and 118.50 yen or between 126.00 and 127.50 yen after three months.