- The share of purchase orders inched up from 52 to 57%
- 71% of all open positions are short
- The nearest resistance is at 117.50, namely the monthly S1
- Major demand area is seen circa 116 yen
- 52% of the survey participants expect the US Dollar to cost less than 120 yen in three months
- Upcoming events: US Labor Market Conditions Index, Japanese 30-y Bond Auction, Japanese Preliminary Machine Tool Orders, US JOLTS Job Openings, US Mortgage Delinquencies, US Wholesale Inventories, Japanese PPI
Despite a decline in US NFP, the Greenback was able to outperform most major peers, with exception against the Swiss Franc. The US Dollar added the most versus the Aussie, 1.90%, followed by 1.43% and 1.19% gains versus the Kiwi and versus the Loonie, respectively. At the same time, the Cable inched 0.61% lower, while the EUR/USD climbed 0.45% also lower. The only loss was seen versus the Swissie (0.23%), while the Buck remained relatively unchanged against the Japanese Yen, adding 0.08%.
The US economy created fewer jobs in January than expected, but rising wages and the unemployment rate at an eight-year low signalled the labour market recovery remains strong. Non-farm payrolls rose by 151,000 jobs last month, missing expectations for a 190,000 gain and following 292,000 new jobs created in December. Yet, it appeared to be enough to push the US jobless rate to 4.9%, down from 5.0%, the Labor Department reported. In January, all the employment gains were in the private sector, which added 158,000 jobs. The services sector dominated the payrolls increase last month, with 118,000 jobs created. The labour participation rate rose to 62.7%, near four-decades low. Fed Chairwoman Janet Yellen said the US economy needs to create just under 100,000 jobs a month to keep up with growth in the working age population. The data came on heels of a private sector report, which showed 205,000 jobs were created in January.
In addition to that, average weekly earnings increased 12 cents an hour or 0.5% on a monthly basis, translating into a 2.5% annualized gain. Until recently, wage growth has been the one factor missing from America's recovery from the recession. As the unemployment rate remains low, many economists expect Americans to see paychecks increase.
Vatsal Srivastava, director at the Blackwater Consulting, explains why the US Dollar is a advancing against the Yen this week. Even though he says that there was nothing fundamentally driving USD/JPY on Monday, one of the key drivers is the falling oil prices, which is actually boosting the Yen, in his opinion, as there is an addition cause for more QQE. Vatsal Srivastava also mentions that "it is going to be a hard economic ride ahead and there seems to be no light on the horizon for Japan as of now". "Lets hope for the best," he added.
Relatively quiet Monday
The only relevant upcoming economic data release today is the US Labor Market Conditions Index. It is designed to estimate labour market activity, but usually has close to no impact on the market prices, as most indicators used in its calculations were already released. Thus, more attention should be directed towards Tuesday. The US JOLTS Job Openings are due on Tuesday, it is the number of job openings during the reported month, with exception of the farming industry. According to the forecasts, improvements are expected in both economic data releases, thus the impact on the Cable could be rather muted. The Yen, however, is unlikely to continue outperforming the US currency, despite some fundamental events, as the BoJ rates turned negative.USD/JPY: market reassesses Friday's data
The Greenback appears to be eager to recover from an almost full week of losses against the Japanese Yen, despite mixed fundamental results on Friday. The USD/JPY currency pair still faces an obstacle, represented by the monthly S1, at 117.50, which could limit the gains, while the second target rests circa 118.19. Weekly technical studies suggest the Buck is under the risk of falling deeper down this week, namely towards the 2015 low at 115.85. During the previous month the USD mostly maintained trade closer to that one-year low, so far unable to edge lower on hopes of an interest rate hike.Daily chart
The pair remains in a consolidative state, as there are no substantial market movers expected today. The bearish trend, however, is intact, but the pair is has the potential to end the day higher, with the 200-hour SMA located only around the 119.00 major level.
Hourly chart
SWFX sentiment stays bearish; elsewhere sentiment is bullish
Traders at OANDA and Saxo Bank have a diametrically opposite view of the pair's future. Clients of both brokers are mostly bullish. Canadian-based foreign exchange company reports that 74% of open positions are long, and the Danish bank reports that 67% of its clients' positions are long.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 120 yen
The largest half of the survey participants (52%) expect the US Dollar to cost less than 120.00 yen in three months. The most popular choice is the 120.00-121.50 price interval, selected by 16% of the voters; however, according to the votes collected between Jan 08 and Feb 08, the mean forecast for May 08 is 119.18. At the same time, 14% of the surveyed believe the Greenback could fall in the 112.50-114.00 price interval after a three month period.