- The portion of buy orders inched up from 63 to 65%
- 59% of traders hold long positions
- Immediate resistance is represented by the monthly S1 and 200-day SMA around 121.15
- The closest support is located around 120.41, namely the weekly S1
- 21% 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 Goods Trade Balance, US Core PCE Price Index, US Personal Spending and Income, US Revised UoM Consumer Sentiment
The US Dollar not only appreciated against some major peers, but declined against the others, despite strong GDP results. The Greenback added the most against the Swissie, namely 1.41%, following with 0.86% and 0.81% gains against the Euro and the Yen, respectively. The Sterling held most resilient, allowing the Buck to gain only 0.45% against it. Nevertheless, a 0.83% decline was registered versus the Loonie and 0.78% versus the Aussie, following with an only 0.50% loss against the Kiwi.
The US economy grew more than previously estimated in the second quarter, supported by robust consumer and business spending. The world's number one economy expanded at an annual rate of 3.7% in the April-June quarter, more than a percentage point greater than the 2.3% originally estimated, according to the Commerce Department. It was the strongest growth since last summer and marked a great improvement from the anaemic 0.6% increase during the January-March quarter when a harsh winter undermined activity. Economists believe growth has slowed in the current quarter to around 2.5%. Some have expressed concern that shrinking global stock markets and a steep slowdown in China will further weaken the economy in coming months. The revision for second quarter growth reflected an advance in consumer spending, which rose at annual rate of 3.1%, up from a 1.8% growth rate in the first quarter. Business investment in structures and equipment was revised higher to show growth of 3.2%, while housing construction was revised up to a surge of 7.8%.
A separate report showed the number of Americans applying for first-time jobless benefits dropped last week, suggesting the labour market remains healthy. Initial jobless claims declined by 6,000 to a seasonally adjusted 271,000 in the week ended August 22, the Labor Department said. The drop comes after four consecutive weekly increases.
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 Goods Trade Balance
From the US side, the most important event is the Goods Trade Balance at 12:30 PM GMT, together with the Personal Spending and Income figures. The Spending is expected to improve, while the Income to deteriorate, thus, shifting attention to the Goods Trade Balance. A positive number indicates that there were more exported than imported goods and, according to yesterday's strong US GDP figures, we should see improvements today as well. As a result, the Yen falls under the risk of declining against the US Dollar today, as a significant number of US fundamentals is forecasted to improve. Furthermore, no significant economic events from the Japanese side are due 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 keeps trying to rise above 121.00
The USD/JPY currency pair behaved in accordance with the forecast, as it surged and stabilised at the 200-day SMA at 121.03. However, the tide might turn today, with the resistance cluster around 121.15 being too strong of an obstacle, unless good fundamental figures trigger a rally. A failure to pierce the resistance is likely to cause the Greenback to retreat to the 120.00 psychological level and perhaps even towards the tough cluster around 119.00, namely the Bollinger band, weekly and monthly S2s. Meanwhile, technical indicators retain bearish signals, suggesting the given pair is to plunge today.Daily chart
The US Dollar kept rising yesterday, without any further attempts to test the new-forming trend-line. However, the bullish momentum appears to have slowed down today, as the USD/JPY currency pair is looming closer to the 200-hour SMA, which could even reverse the movement.
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 from 63 to 65%. Meanwhile, 60% 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 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 28 and August 28, 61% of the participants expect the US Dollar to cost more than 123 yen in three months. However, the mean forecast for November 28 is 123.02. Meanwhile, the highest number of poll participants, namely 21%, 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 12% 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.