- Buy commands now take up 67% of the market
- Bullish market sentiment returned to its Thursday's level of 73%
- Immediate resistance is represented by the weekly PP at 124.40
- The closest support is located at 124.07, namely the 20-day SMA
- 19% of traders expect the Greenback to cost between 124.50 and 126.00 yen in three months
- Upcoming events today: FOMC Member Fischer and Lockhart Speeches, Japanese M2 Money Stock
The Greenback experienced mixed performance over Friday and the weekend, as the Bureau of Labor Statistics posted worse-than-expected NFP data. As a result, the US Dollar declined 0.95% against the Kiwi and 0.73% versus the Aussie, following with a 0.34% loss against both the Euro and the Yen. Nevertheless, gains were recorded against the Swissie, the Loonie and the Sterling.
US employment climbed at a solid pace last month and wages recovered after a surprise stall in the preceding month, adding to signs of an improving US economy that could open the door wider to a Fed interest rate lift in September. American employers created 215,000 jobs in July, slightly less than the 225,000 economists had expected to see. Nevertheless, the June data was revised up to 231,000, according to the Department of Commerce report. At the same time, the jobless rate remained at the lowest level of 5.3%. The unemployment rate is near the 5.0% to 5.2% range most Fed policy makers believe is consistent with a steady but low level of inflation. Meanwhile, the labour force participation stabilized at its multi-decade lows of 62.6% after a sharp 0.3 percentage point drop in June.
In addition, the average workweek increased to 34.6 hours, the highest since February, from 34.5 hours in June. Average hourly earnings rose five cents, or 0.2%, last month after being flat in June. That put wages 2.1% above their year-ago level, but left them well shy of the 3.5% growth rate economists associate with full employment. Still, the gain supports views that a sharp slowdown in compensation growth in the second quarter and consumer spending in June were temporary. A tighter jobs market should also produce higher wage growth, the Fed believes.
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."
FOMC Member Fischer and Lockhart Speeches
The Japanese Consumer Confidence and Economy Watchers Sentiment both turned out to be worse-than-anticipated early today, thus weighing on the Japanese Yen. Neverhteless, more important events are due later today from the US side, namely FOMC Member Lockhart and Fischer Speeches. More insight concerning the US interest rate hike is expected to be provided in their speeches, thus, volatility is likely during that time. However, the labor market in the US still posted slightly worse-than-expected figures, although still was considered rather strong. As a result, the Greenback could weaken rather than strengthen against most major peers.
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 climb over 124.40
Although the USD/JPY currency pair declined last Friday, losses exceeded expectations. The US Dollar settled at 124.20, rather than the predicted 124.40 level, but with hopes of appreciating again today. However, the weekly pivot point at 124.40 is now blocking the path, even though poor Japanese fundamentals are pushing the Yen lower. Furthermore, news on the US interest rate hike could push the Greenback even higher towards the Bollinger band at 124.77, but a slump to around 124.00 is not out of the question.Daily chart
The USD/JPY currency pair jumped off the 125.00 major level and fell all the way down to the 200-hour SNA, thus, breaching the support trend-line. Although the trend-line was not expected to be reached on Friday, the bullish momentum still pushed the exchange rate above it. The trend-line is to remain reliable, unless the given pair manages to pierce it to the downside once again today.
Hourly chart
Bulls still prevailing over bears
OANDA and SAXO clients retain their bullish perspectives towards the Buck. The share of bulls at OANDA edged higher to 58% (previously 55%), whereas 61% of SAXO Group clients retain a positive outlook towards the Greenback, down from 63%.
Spreads (avg, pip) / Trading volume / Volatility
19% of traders expect the Greenback to cost between 124.50 and 126.00 yen in three months
According to the survey conducted between July 10 and August 10, 67% of the participants expect the US Dollar to cost more than 123 yen in three months. However, the mean forecast for November 10 is 124.56. Meanwhile, the 124.50-126.00 price interval received the largest amount of votes, chosen by 19% of all poll participants, while the second largest choice, selected by 18% of the surveyed, implies that the US Dollar will cost less than 118.50 yen.