- The portion of buy orders declined from 58 to 36%
- Almost three quarters of all positions are now long, namely 73%
- Immediate resistance is represented by the weekly PP at 119.71
- The closest support is located around 118.02, namely the weekly S1
- 17% of traders expect the Greenback to cost between 124.50 and 126.00 yen in three months
- Upcoming events today: Japanese Final GDP, US Labor Market Conditions Index, US Consumer Credit Change
Amid mixed labor market data, the US Dollar advanced against some major peers, but declined against the others. With the Non-Farm Payrolls showing poor figures, the USD/JPY suffered a 0.80% loss, following with a 0.27% decline versus the Euro and 0.22% versus the Swissie. Nevertheless, stronger falling Unemployment Rate boosted the US Dollar versus the Kiwi, adding 1.63%. A 1.22% gain was also recorded versus the Aussie, 0.65% against the Loonie, while the Cable went down 0.40%.
US job growth unexpectedly slowed in August, dimming prospects of a Fed interest rate hike in September, even as unemployment rate declines to the lowest level in more than seven years, while wages accelerated. Nonfarm payrolls increased 173,000 last month as the manufacturing sector lost the most jobs since July 2013, following an upwardly revised 245,000 rise in July, according to the Labor Department. It was the smallest gain in employment in five months, while economists had forecast nonfarm payrolls increasing by 220,000 in August. At the same time, the US jobless rate dropped to 5.1% versus a more modest decline to 5.2% expected by economists. The unemployment rate reached the range that most Fed officials think is consistent with a low but steady rate of inflation.
The US labour market is strengthening and adds to a slew of upbeat data, including reports on automobile sales and housing, that has indicated the world's number one economy was moving ahead with strong momentum early in the third quarter after expanding at a robust 3.7% annual rate in the April-through-June period. At the same time, the increase in hourly earnings left them 2.2% above their year-ago level, still well below the 3.5% growth rate economists consider healthy.
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."
Japanese Final GDP
Even though there is a Bank Holiday in the US today, tomorrow attention should be paid to the US Labor Market Conditions Index, which indicates the labor market activity, however, it tends to have little impact on the exchange rate, as most of the indicators used in its calculations were already released previously. The second event is the US Consumer Credit Change – an amount of money that individuals borrowed. It shows if consumers can afford large expenses, which can fuel economic growth. However, a high figure may also indicate that the economy is overheating, as consumers borrow in order to live beyond their means. Meanwhile, on Monday the Ministry of Finance is to release the Japanese Final GDP figures. Due to this release being the last one for the second quarter, it is likely to have a small impact on the Yen. Nevertheless, it is the main gauge of the USD/JPY exchange rate today, thus, a shift in either direction from the previous figure is to determine the final movement at the end of the day.
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 to keep inching lower
The USD/JPY currency pair dropped below 120.00 last Friday, reaching a fresh weekly low. However, trade closed at the major level of 119.00, but leaving room for more weakness. Despite making attempts to rebound on Monday, the Buck risks edging lower again, as technical studies retain their bearish signals, and the 20-day SMA just crossed the 100-day one to the downside, providing a signal to sell the US Dollar. Immediate support now rests near the 118.00 psychological level, represented by the weekly S1.Daily chart
The USD/JPY currency sustained more weakness after breaking through the 200-hour SMA last week. However, losses were held by the 119.00 mark, preventing the pair from edging lower today as well. The 200-day SMA is providing substantial resistance and should keep the Greenback at bay today.
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 64%. Meanwhile, 60% of SAXO Group clients retain a positive outlook towards the Greenback, up from 56%.
Spreads (avg, pip) / Trading volume / Volatility
17% of traders expect the Greenback to cost between 124.50 and 126.00 yen in three months
According to the survey conducted between August 7 and September 7, only 49% of the participants expect the US Dollar to cost more than 123 yen in three months. However, the mean forecast for December 7 is 122.86. Meanwhile, the highest number of poll participants, namely 17%, suggest that the US currency will cost between 124.50 and 126.00 yen in three months, while the second largest choices, both selected by 15% of the surveyed, imply that the US Dollar will cost either between 120.00 and 121.50 yen or between 121.50 and 123.00 yen.