- The number of orders to acquire the Buck increased from 65 to 72%
- 73% of all positions are long today
- Immediate resistance is represented by weekly R2 and monthly R1 around 125.47
- The closest support is located around 124.73, namely weekly R1 and the Bollinger band
- 23% of traders expect the Greenback to cost between 124.50 and 126.00 yen in three months
- Upcoming events today: US Challenger Job Cuts, US Jobless Claims, US Natural Gas Storage, Japanese Monetary Policy Statement
The US Dollar experienced mixed performance over the day. Gains of 0.39% and 0.35% were detected against the Yen and the Aussie, respectively, following with a 0.15 gain against the Kiwi. The Greenback also declined versus the Sterling (0.23%), the Loonie (0.17%) and the Euro (0.16%), while remaining relatively unchanged against the Swissie, adding 0.09%.
US private employers hired fewer workers in July than expected, reducing expectations of a robust jobs data in the government's payrolls report due Friday. American companies took on 185,000 workers in the reported month, which was the smallest increase since April and compared with economists' forecast for a 215,000 gain. Meanwhile, private payroll data in June was revised down to 229,000 from an originally reported 237,000 increase, which was the biggest surge since December. The ADP figures are typically released ahead of the US Labor Department's more comprehensive non-farm payrolls report, which includes both public and private-sector employment. Economists expect total US employment to have increased by 223,000 jobs in July. The unemployment rate is seen to remain for a second month at 5.3%, the lowest level since April 2008.
A separate report showed the US trade gap expanded in June as a strong Dollar and weakness overseas continued to undermine demand for American-made goods. The trade gap with other nations widened 7.1% to a seasonally adjusted $43.84 billion in June, the Commerce Department reported. That was wider than the $43.5 billion shortfall projected by economists. The gap reflected an increase in American purchases of imports, and falling global demand for US goods. Imports rose 1.2%, while exports declined 0.1%.
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 Jobless Claims
As usual, on Thursday the Department of Labor is to release data on the US Unemployment Claims. The number of people who applied for unemployment insurance benefits is expected to increase. Even though it tends to have a minor impact on the US Dollar Index, it still indicates a weakening labor market in the United States. From the Japanese side there will be no further data releases today; however, tomorrow the BoJ is to have a Press Conference and is to announce its Monetary Policy Statement, which will definitely have an impact on the USD/JPY currency pair.
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 to take another crack at 125.00
The ISM Non-Manufacturing PMI outweighed the poor ADP Non-Farm Employment Change data, which resulted in the USD/JPY surge on Tuesday. However, the pair was unable to stay near the 125.00 major level, but might test it again today. Trade opened above the weekly R1 and upper Bollinger band, which are providing rather strong support and should cause another rally today. Nevertheless, poor US fundamentals could still push the Greenback lower, despite bullish technical indicators.Daily chart
The US Dollar's attempts to decline against the Yen failed, as the support trend-line pushed the pair all the way up to 125.00. Although the USD/JPY began to slide down afterwards, the bullish momentum can still be regained, amid the weaker Yen, despite poor fundamental data expectations.
Hourly chart
Bulls still prevailing over bears
OANDA and SAXO clients retain their bullish perspectives towards the Buck. The share of bulls at OANDA remains unchanged at 55%, whereas 63% of SAXO Group clients retain a positive outlook towards the Greenback, up from 61%.
Spreads (avg, pip) / Trading volume / Volatility
23% of traders expect the Greenback to cost between 124.50 and 126.00 yen in three months
According to the survey conducted between July 06 and August 06, 72% of the participants expect the US Dollar to cost more than 123 yen in three months. However, the mean forecast for November 06 is 124.74. Meanwhile, the 124.50-126.00 price interval received the largest amount of votes, chosen by 23% of all poll participants, while the second largest choice, selected by 15% of the surveyed, implies that the US Dollar will cost less than 118.50 yen.
All in all, traders are bullish on the present pair this week, with 60% of responds being optimistic. During this week, on Friday, the Bank of Japan is to announce its benchmark interest rate and publish the rate statement. Later in the day, the US is to round up the week with the closely watched government report on nonfarm payrolls.
Geula4x is on the majority's side of the Dukascopy traders, as he believes the USD/JPY is bullish on the daily chart. "Price has bounced from 123.00 round number support area at July 27, it seems that the Fed principle decision to raise interest rates has strengthened the USD against the JPY", he said. Geula4x also mentioned that resistance lies around 124.50, which has capped the price multiple times, starting at June 17. Nevertheless, aslamhammad has a bearish outlook, as he believes that "on Friday we had a double top in the US Dollar index, so I think by next Friday we will see the USD close lower."