- The share of buy orders inched up from 39 to 63%
- 55% of all positions are long today
- Immediate resistance is represented by the weekly S1 at 120.41
- The closest support is located around 119.00, namely the monthly and weekly S2s and the Bollinger band
- 20% of traders expect the Greenback to cost either between 123.00 and 124.50 yen or between 124.50 and 126.00 yen in three months
- Upcoming events today: US Preliminary GDP, US Jobless Claims, US Pending Home Sales, Japanese Household Spending, Japanese National Core CPI, Japanese Retail Sales
The US Dollar appreciated against most major peers, amid much better-than-anticipated Durable Goods Orders figures. The Buck gained the most against the Euro, 1.87%, following with 1.41% gains against both the Sterling and the Swissie. However, the US currency added the least versus the Kiwi (0.40%), while declining 0.24% against the Aussie and 0.33% versus the Loonie.
Orders for US long-lasting manufactured goods increased in July, while demand in a category that tracks business investment plans surged the most in 13 months. The Commerce Department reported that orders for durable goods rose 2% last month following the 4.1% surge in the preceding month. Orders for non-defence capital goods excluding aircrafts, a proxy for private sector investment plans, advanced 2.2% in July, marking the biggest increase since June 2014 and following the 1.4% increase in June. Excluding transportation, core durable orders edged 0.6% higher, which was stronger than the 0.4% gain markets had expected and the June print was revised to a 1% gain compared with a 0.8% increase estimated previously. While July data is encouraging, US manufacturers still face headwinds due to a stronger Dollar and economic turbulence in China, the world's second biggest economy.
Meanwhile, New York Fed President William Dudley said that prospects of interest rate hike in September "seems less compelling" given the recent market turmoil, hinting that fears of China's economy slowdown are impacting Fed's monetary policy. However, Dudley warned about overreacting to "short-term" market volatility and kept the door open to hiking rates during Fed's meeting on September 16-17.
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 Preliminary GDP
At 12:30 PM GMT the Bureau of Economic Analysis is to release the Preliminary GDP of the US. The GDP is forecasted to show significant improvements, thus boosting the US Dollar and putting the rate hike probability as soon as possible back on track. At the same time, the Department of Labor is to release the weekly Jobless Claims figures. Even though this particular data release has little impact on the exchange rate, it is still closely monitored by the Fed officials, helping to determine the future monetary policy. Furthermore, the Jobless Claims are closely correlated with the consumer spending, thus giving more insight on overall economic health in the country. At 14:00 PM GMT the US Pending Home Sales is due, the data of which is also forecasted to show significant improvements, only strengthening the US currency even more if expectations are met. Nevertheless, from the Japanese side the Household Spending are expected to show signs of growth in today's release, with Retail Sales improving as well. However, the National Core CPI of Japan is forecast to worsen, thus, mixed data is unlikely to help the Yen outperform the Greenback today.
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 hold above 120.00, awaits GDP data
The Greenback not only stabilised above 120.00 yesterday, but also tested the weekly S1 at 120.41. The Buck is nearly halfway through negating this week's losses, which might occur today if the US Dollar receives a sufficient boost. However, technical studies retain their bearish signals, suggesting the USD/JPY is to weaken today, although a tough cluster supports the pair from below, represented by the Bollinger band and weekly and monthly S2s. The base case scenario, on the other hand, is a surge towards the 200-day SMA around the 121.00 major level.Daily chart
The USD/JPY keeps consolidating after Monday's sharp slump, but with a possible new support trend-line forming. The trend-line prevented the Buck from edging lower yesterday on several occasions. Another rebound in the near future would confirm the trend-line, making it viable as a fully-realised support.
Hourly chart
Bulls still prevailing over bears
OANDA and SAXO clients retain their bullish perspectives towards the Buck. The share of bulls at OANDA returned to its Tuesday's level of 63%. Meanwhile, 60% of SAXO Group clients retain a positive outlook towards the Greenback, up from 57%.
Spreads (avg, pip) / Trading volume / Volatility
20% of traders expect the Greenback to cost either between 123.00 and 124.50 yen or between 124.50 and 126.00 yen in three months
According to the survey conducted between July 27 and August 27, 60% of the participants expect the US Dollar to cost more than 123 yen in three months. However, the mean forecast for November 27 is 123.14. Meanwhile, the highest number of poll participants, namely 20%, suggest that the US currency will cost either between 123.00 and 124.50 yen or between 124.50 and 126.00 yen in three months, while the second largest choices, selected by 11% of the surveyed each, imply that the US Dollar will cost between 117.00 and 118.50 yen, between 120.00 and 121.50 yen or between 126.00 and 127.50 yen.
The survey among Dukascopy Community members shows traders are still widely bearish on the perspectives of the USD/JPY cross, as more than 72% of all votes are negative towards the US Dollar.
A member of the Dukascopy Community, RacerX, gave his view on the USD/JPY. "This is a tough call, if investors selloff on US equities, the Dollar will likely strengthen. Conversely, a selloff on the Nikkei will strengthen the Yen. I see the selloff in the US markets to be harsher than in Japan." Another Dukascopy Community member, williamb, has a bearish outlook towards the Buck. "Yen is on the resistance from some time, with the volatility, that appears to decrease. A correction is imminent," he stated.