- Buy commands now take up 64% of the market
- Bullish market sentiment returned to its Monday's level of 52
- Immediate resistance is represented by the weekly PP at 124.40
- The closest support is located at 124.15, namely the 20-day SMA
- 20% of traders expect the Greenback to cost between 124.50 and 126.00 yen in three months
- Upcoming events today: US Retail Sales and Core Retail Sales, US Jobless Claims, US Import Prices, US Natural Gas Storage
The US Dollar declined dramatically against most major peers, as the rate hike decision was most likely delayed yesterday. The largest decline was registered against the Swissie and the Euro, namely 1.28% and 1.00%, respectively. Serious losses were also detected versus the Loonie (0.94%), the Aussie (0.92%) and the Kiwi (0.90%), whereas the US Dollar held the strongest against the Sterling, having lost only 0.17% against it.
The number of job openings in the US dropped in June from the highest level on record, but remained at a level indicating robust demand for workers. Job openings declined to 5.25 million in June, compared with a record 5.36 million in May, the Labor Department's Job Openings and Labor Turnover Survey showed. Hires rose to the highest level of the year at 5.12 million, while the number of Americans voluntarily quitting their jobs increased to 2.75 million from 2.73 million the preceding month. The number of voluntary quits typically rises when people are confident about employment prospects. The key jobs report, which was released earlier this month, showed the jobless rate remained at 5.3% in July. Nonfarm payrolls surge a seasonally adjusted 215,000 in July and 231,000 the previous month. Both reports are closely watched by Fed policy makers. Chairwoman Janet Yellen said the rate of voluntary quitting is a key gauge of workers' confidence in the nation's economy. Meanwhile, the share of Americans participating in the labour force were at 62.6% in July, matching the lowest level since 1977, a possible sign there is a mismatch between job openings and job seeker.
In the meantime, investors are starting to push back expectations for the Fed to hike interest rates in September as the rapidly weakening Yuan has stoked concerns about China's economic growth and global inflation expectations.
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 Retail Sales
Thursday is going to be a quiet day in terms of Japanese fundamental data, which leaves us with the US ones to influence the USD/JPY. The most important event is the US Retail Sales, as it indicates the change in total value of sales at the retail level. The forecast stands at 0.5%, up from -0.3%, which is a rather serious rebound. However, according to historical data, the figures might disappoint today and show less-than-expected growth. The Retail Sales data also gives a broad look at the consumer spending data, which accounts for the majority of overall economic activity. As a result, the Retail Sales data could have a serious impact on the Fed's rate hike decision in September; volatility is expected.
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 attempts to regain the bullish momentum
The US Dollar sustained heavy losses on Wednesday, even reaching the previous week's low of 123.80. As a result, this week's gains were completely negated, as the Buck settled at 124.30. Technical indicators shifted to the bullish side today, suggesting the USD/JPY is to rebound. Strong fundamental data could push the Greenback well above the weekly pivot point at 124.40 and maybe even towards the resistance cluster at 125.00. Nonetheless, the US currency remains vulnerable to another decline if the fundamentals disappoint later today.Daily chart
The US Dollar failed to rebound from the 200-hour SMA, after breaching the support trend-line, thus, rendering it unviable. The USD/JPY fell all the way down to the weekly low of 123.80, which helped the pair to regain the bullish momentum. The pair has been appreciating ever since and attempting to stabilise above the 200-hour SMA once more.
Hourly chart
Bulls still prevailing over bears
OANDA and SAXO clients retain their bullish perspectives towards the Buck. The share of bulls at OANDA improved to 59% (previously 54%), whereas 67% of SAXO Group clients retain a positive outlook towards the Greenback, up from 58%.
Spreads (avg, pip) / Trading volume / Volatility
20% of traders expect the Greenback to cost between 124.50 and 126.00 yen in three months
According to the survey conducted between July 13 and August 13, 67% of the participants expect the US Dollar to cost more than 123 yen in three months. However, the mean forecast for November 13 is 124.72. Meanwhile, the 124.50-126.00 price interval received the largest amount of votes, chosen by 20% of all poll participants, while the second largest choice, selected by 17% 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 72.7% of responds being optimistic.
Aslamhammad, one of the Dukascopy community member, has a bullish outlook towards the USD/JPY currency pair. "In my view, USD index is currently in an uptrend, so I would expect USD/JPY pair to exchange higher", he mentioned. However, a trader who expects the Yen to outpferform the Greenback, namely williamb, said that the Japanese economic situation will become worse, hence, his sentiment is bearish towards the given pair.