- Now 58% of commands are to acquire the US Dollar
- Market sentiment returned to its Tuesday's level of 71%
- Immediate resistance is represented by the weekly PP at 124.40
- The closest support is located at 124.16, namely the 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 PPI, US Core PPI, US Capacity Utilization Rate, US Industrial Production, US Preliminary UoM Consumer Sentiment, Japanese Preliminary GDP
The US Dollar regained some bullish momentum after the ‘currency war' anxiety was dropped by the PBoC . As a result, the Buck added 0.83% against the Kiwi and 0.65% versus the Loonie. Furthermore, the US Dollar remained relatively unchanged against four major peers, adding 0.08% against the Yen and 0.01% versus the Swissie. 0.01% and 0.02% were lost versus the Euro and the Sterling, respectively.
US retail sales rose more than expected in July, as Americans increased purchases of automobiles and clothing, giving the US economy a boost in the third quarter. The upbeat data should strengthen the expectations of the Fed's interest rate hike as early as next month. Retail sales climbed a seasonally adjusted 0.6% in July from a month earlier, the Commerce Department reported. Excluding cars, sales rose 0.4% in July, the third straight month of solid gains. Consumer spending accounts for about 70% of economic output of the US, and thus is an important measure of the economy's vitality. Retail sales represent a significant share of overall consumer spending. Americans are receiving a boost by several factors that could result in sustained gains over the course of coming months. Robust job growth over the past year and a half has increased the number of people with paychecks, while a decline in gasoline prices to $2.63 nationally, down 25% from the previous year, has cut their costs.
Meanwhile, the number of Americans seeking unemployment benefits unexpectedly rose in the week ended August 8, but the trend continued to suggest a strengthening labour market. Initial claims for state unemployment benefits climbed 5,000 to a seasonally adjusted 274,000 last week, according to the Labor Department.
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 PPI and US Preliminary UoM Consumer Sentiment, Japanese Preliminary GDP
On Friday there will be no economic events from the Japanese side, although the Preliminary GDP will be released at the end of Sunday and will set the prices for Monday as well. From the US side attention should be paid to the US PPI. Although the growth is expected to slow down, chances are that the data will exceed expectations to the upside. Furthermore, the US Capacity Utilization Rate is also forecasted to grow at a slower pace of 78%, down from 78.4%. The last significant fundamental even to influence the USD/JPY is the Preliminary UoM Consumer Sentiment, which is due at 14:00 PM GMT. Improvements are anticipated, although historical data shows diverse figures. Ultimately, the US Dollar is likely to be boosted by the fundamentals, despite some possible poor readings.
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 keeps testing the weekly PP
Even though the USD/JPY advanced on Thursday, the weekly pivot point limited those gains at 124.40. Nevertheless, the weekly PP is not expected to hold for much longer, as today's fundamentals are likely to push the Greenback higher. Furthermore, technical indicators retain the bullish signals, bolstering the possibility of a rally today. The second resistance lies out of reach, thus, we expect the given pair to advance to around 124.70. However, the Buck risks falling back to around 124.00 in case the data disappoints.Daily chart
The US Dollar failed to stabilise above the 200-hour SMA and slipped back under it yesterday. The SMA keeps preventing the Greenback from outperforming the Yen, although the bullish momentum is still expected to be regained by day's end, as the support around 124.00 could cause a rebound.
Hourly chart
Bulls still prevailing over bears
OANDA and SAXO clients retain their bullish perspectives towards the Buck. The share of bulls at OANDA declined to 56% (previously 59%), whereas 67% of SAXO Group clients retain a positive outlook towards the Greenback.
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 14 and August 14, 68% of the participants expect the US Dollar to cost more than 123 yen in three months. However, the mean forecast for November 14 is 124.74. 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 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.