- The share of buy orders edged up from 40 to 56%
- There are now 71% of traders with a positive outlook towards the Buck
- Monthly PP represents resistance around 119.93
- Support is around 119.45 (weekly S1 and the Bollinger band)
- 65% of traders see the Dollar higher than 120 yen on Jun 2
- Upcoming events today: US Average Hourly Earnings, US Non-Farm Payrolls, US Unemployment Rate, US Factory Orders, FOMC Member Fischer Speech
The Greenback advanced against some major peers, but declined against the majority of other currencies. The US Dollar managed to outperform the Swiss Franc, gaining 0.40%, whereas a 0.34% loss was recorded versus the Loonie, following with a 0.18% and 0.16% declines against the Aussie and the Euro, respectively. Furthermore, the Buck remained relatively unchanged versus the Kiwi, the Sterling, losing 0.01% and 0.02%, respectively, while also adding 0.04% against the Japanese Yen.
The number of Americans who applied for the US unemployment benefits rose by 10K to 277K in the week ended September 26, but initial claims remain extremely low in a sign of steady improvement of the labour market. The figure missed market expectations, as it anticipated the reading of total 273K claims. Overall, jobless claims in the US are hovering near historically low levels despite headwinds from slowing emerging economies, as employers retain staff amid solid domestic demand. Meanwhile, in annual terms the number of people continuing to receive jobless benefits dropped by 53,000 to 2.19 million.
Meanwhile, activity in the manufacturing sector of the world's biggest economy slumped to its lowest level since May 2013 and is approaching a contraction territory. The PMI indicator released by the Institute for Supply Management slid for a fourth consecutive month to reach 50.2 points in September, down from 51.1 in August. Analysts estimated a downward change to 50.6 points only. Among factors weighing on activity in the industry, analysts mention strong US Dollar, fears over slowdown in China and turbulent equity markets, while falling oil prices dragged lower growth in extraction sector.
In response to the latest Bank of Japan meeting, Stuart Allsop, head of financial market strategy at BMI Research, said that no action from the central bank was expected and that they are likely to "refrain from doing any more stimulus this year". However, he noted that "the risks have increased".
Concerning the GDP growth, the analyst doubts that it will "get above 1% anytime in the foreseeable future". The reasons for this are manifold. First, there is "a huge headwind in terms of demographics". Additionally, there is a decline in growth of China coupled with global economic slowdown. However, the main negative factor provided by Allsop is a "very unstable production structure". He explains that the real interest rate is negative, which is "sending contradictory signals to the real economy", and this in turn leads to a low chance of "a productivity boom
As for the Japanese Yen, Allsop is bullish on the currency. In his opinion there are two main contributing factors. The first one is that "investors lose faith in the willingness of the BoJ to act. At the same Allsop adds that the Yen has proven recently its status as a global safe have, and this is beneficial for the value of the currency being that "global financial markets are looking quite shaky", which is negative for the risk sentiment. At the same time, the analyst mentioned that USD/JPY "may fall quite significantly in the coming months", and if this is the case, "this would raise the prospects of intervention from the BoJ."
US Non-Farm Payrolls
From the US side, a number of significant data release are due today, with the most important among them being the Non-Farm Payrolls. The Non-Farm Payrolls are released by the US Department of Labor and present the number of people on the payrolls of all non-agricultural businesses. Fed's Yellen commented that conditions in the labor market have improved, thus, we might see a stronger-than-anticipated figure today, which would boost the US currency. At the same time, the US Average Hourly Earnings and the US Unemployment rate are due, which could help the US Dollar climb or weigh on it. Finally, the US Factory Orders, which are a measure of the total orders of durable and non-durable goods, such as shipments (sales), inventories and orders at the manufacturing level which can offer insight into inflation and growth in the manufacturing sector, as a result, possibly providing some early hints on the monetary policy. From Japan there are no data releases worth mentioning.
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
Despite experiencing some volatility on Thursday, the USD/JPY currency pair remained relatively unchanged. Ultimately, the Greenback closed trade in front of the monthly PP, but further efforts to appreciate might be prevented. The pair struggled to rise above the 120.00 major level, as it is bolstered by a resistance cluster, represented by the 20-day SMA, weekly and monthly PPS. Furthermore, technical indicators retain their bearish signals; however, the US Payrolls data could still stimulate a rally towards the 120.33 psychological level, the pinnacle of the resistance cluster.Daily chart
The US Dollar appears to be glued to the 120.00 major level, as the exchange rate returned under this level after rather good attempts to appreciate. However, as the pair edged closer to the up-trend, a rebound occurred, which lasted ever since. The USD/JPY awaits the US payrolls data in order to break away from the 120.00 psychological area.
Hourly chart
Bulls preserve majority
OANDA and SAXO Bank also report minor preponderance of bullish market participants. In the first case the longs take up 63% of the market (60% previously). In the second case 62% of open positions are long, up from 60% yesterday.
Spreads (avg, pip) / Trading volume / Volatility
65% of traders see the Dollar higher than 120 yen on Jun 2
The average Dukascopy website visitor expects the US Dollar to cost almost 2 yen more in three months' time. Almost a quarter of survey participants (20%) estimates that the Greenback will be worth between 121.50 and 123 yen by the mid-December. At the same time, it is worth mentioning that 58% of the forecasts are above 121.50 and 65% of the given forecasts are set above the level of 120 yen.
This week overall sentiment remained negative, as slightly more than 45% of traders expect the pair to close below the 120.00 level in the end of the present working week, while the average expectation stays just below this level.
Nuonrg, one of the participants of the weekly Community forecasts, believes that "after forming a bearish flag, still the long uptrend is in place as a bull flag." Nuonrg suggests that in order to prove the upside, the pair has to break the 121.00. "Last candles seem choppy range, but today seems firm up. Therefore, I am in favour of a long-run," the trader added. Joining the bears this week, rokasltu, another member of the Dukascopy Community, expects the USD/JPY to fall deeper down. "I think even NFP data will not influence rate much as it resides near mark which satisfies both buyers and sellers," rokasltu commented on the matter.