- The number of purchase orders remains unchanged at 67%
- 73% of them hold long positions (previously 75%)
- Immediate resistance is represented by the weekly PP at 122.49
- The closest support is located around 122.65, namely the lower Bollinger band and support trend-line
- 20% of traders expect the Greenback to cost more than 130.50 yen in three months
- Upcoming events today: FOMC Member Lockhart Speech, US CB Consumer Confidence, US New Home Sales
The US Dollar suffered more losses, amid dampened hopes of a September rate hike and poor Manufacturing PMI data. The Greenback declined 1.39% versus the Yen, 1.25% versus the Euro and 1.24% against the Swissie. However, gains of 1.15% and 1.09% were recorded against the Aussie and the Loonie, respectively. Furthermore, the Buck remained relatively unchanged against the Kiwi, losing 0.08%, and the Sterling, adding 0.08%.
Activity in the US manufacturing sector surprised to the downside in August, as factory output growth slowed from the quickest pace in three months. According to Markit, flash reading of manufacturing activity in the world's number one economy dropped to 52.9 this month, marking the lowest level since October 2013. Economists, however, had expected the gauge to remain unchanged at 53.8.
Markit's data showed a strong growth of overall new order volumes received by manufacturers, albeit the rate of expansion moderated slightly since July. Sluggish export sales remained a drag on new business intakes this month. On top of that, weak capital spending in the energy sector continued to weigh on some manufacturers' order volumes. Softer rates of output and new business growth contributed to greater caution regarding staff employment in August, with a slowdown in job creation to the level last seen in July 2014. August data also indicated broadly similar rates of input price and output charge inflation as those registered in July. Higher average cost burdens have now been recorded for four consecutive months, but the rate of inflation remained well below the long-term average in August. Additionally, the latest rise in factory gate charges was only modest, with survey respondents linking this to weak cost pressures, especially in terms of raw material prices.
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 Markit Manufacturing PMI and FOMC Member Lockhart Speech
Monday is going to be a really quiet day in terms of fundamental events and data releases. The only event to influence the USD/JPY currency pair is Lockhart's speech at 19:55 PM GMT. As usual, clues concerning the Fed's monetary policy are expected during his speech, thus, volatility is also likely. This speech could help the US currency recover after harsh losses on Friday. Furthermore, tomorrow at 14:00 PM GMT the CB Consumer Confidence is to be released, which shows the survey results of households, that rated the current and future economic and business conditions. Improvements are expected, suggesting the overall situation in the US is stabilising. To back this up, the New Home Sales, which are due at the same, are also forecasted to rise, compared to the preceding release.
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 on the verge of losing its grip
The US Dollar suffered heavy losses on Friday, not only breaking through the strong support cluster, but also breaking through the third one at 122.19 and under 122.00 major level. The support trend-line limited the losses over the weekend, but the Buck risks edging lower today, thus, breaking the uptrend. Although the Yen is trying to push the Greenback to its July's low, the bullish momentum could still be regained if the Buck receives enough reinforcements from Lockhart's speech today.Daily chart
The USD/JPY keeps falling down since the middle of the previous week, with a sharper decline each day. The pair has already dropped below 121.00 and keeps edging lower towards 120.00. If the pair breaks through the 120.00 major level, declines could then extend to 118.88, namely the May 14 low.
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 64% (previously 63%), whereas 57% of SAXO Group clients retain a positive outlook towards the Greenback, down from 61%.
Spreads (avg, pip) / Trading volume / Volatility
20% of traders expect the Greenback to cost more than 130.50 yen in three months
According to the survey conducted between July 24 and August 24, 76% of the participants expect the US Dollar to cost more than 123 yen in three months. However, the mean forecast for November 24 is 125.30. Meanwhile, the highest number of poll participants, namely 20%, suggest that the US currency will cost more than 130.50 yen in three months, while the second largest choice, selected by 18% of the surveyed, implies that the US Dollar will cost between 124.50 and 126.00 yen.