- The portion of orders to purchase the US Dollar increased from 46 to 58%
- 71% of traders hold long positions
- The 20-day SMA, the weekly and the monthly PPs around 108.50 represent immediate resistance
- Support is around 105.40
- 61% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: US Initial Jobless Claims, US Average Hourly Earnings, US Non-Farm Payrolls, US Unemployment Rate, US Consumer Credit
The Greenback managed to post gains across the board, despite the ADP Non-Farm Employment Change data disappointing dramatically. The upbeat US Services PMI caused the US Dollar to appreciate against most major peers, with the USD/CAD adding 1.14%, also boosted by a poor reading of the Canadian Trade Balance. Meanwhile, the Buck added 0.49% against the Kiwi, followed by a 0.38% gain against the Yen, 0.37% versus the Aussie, 0.32% against the Swissie and 0.28% against the Sterling. The smallest rally was registered against the Euro, only 0.08%.
American private employers added the fewest workers in three years in April, considerably below economists' expectations, with signs of weak hiring activity across most sectors. Employers added 156,000 jobs in April, according to Automatic Data Processing Inc. Economists had predicted an increase of 193,000. Moreover, ADP lowered March's gains to 194,000 from the prior estimate of 200,000. The ADP figures come ahead of the Labor Department's more comprehensive non-farm payrolls report on Friday, which includes both public and private-sector employment. Economists are looking for US private payroll employment to have increased by 193,000 jobs in April, compared with 195,000 the month before. Total non-farm employment is expected to be 202,000. The unemployment rate is expected to remain at 5.0% recorded a month earlier. Fed policy makers are counting on a strengthening job market to pull the economy out from a first-quarter slump. San Francisco Fed President John Williams said he is optimistic about the US economy and was giving little weight to the slowdown in first quarter gross domestic product. Atlanta Federal Reserve President Dennis Lockhart said two rate hikes this year are certainly possible.
In a separate economic report released Wednesday, the U.S. trade deficit shrank in March by almost 17% to $40.4 billion — the lowest level in more than a year.
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.
US ADP Non-Farm Employment Change and US Services PMI
There is a bank holiday in Japan today, thus there is only one economic data release to influence the USD/JPY pair, namely the US Initial Jobless Claims. The Jobless Claims are released by the US Department of Labor and are a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labor market. A larger than expected number indicates weakness in this market which influences the strength and direction of the US economy.USD/JPY struggles to retake 107.00
Upbeat US Services PMI data caused the Greenback to outperform the Japanese Yen on Wednesday, but with the exchange rate unable to move over the 107.00 psychological level. Technically, supply at this major level could trigger a USD/JPY sell-off, with the nearest support located around 105.35, namely the Bollinger band and the 20-month low. On the other hand, the pair managed to maintain a somewhat bullish trend since the beginning of the week, but with the 108.00 mark being the upper border for a possible rally today. Technical studies, however, are in favour of the bearish scenario.Daily chart
The USD/JPY appears to have postponed its recovery yesterday, now being in consolidation. The 200-hour SMA is still required to be pierced in order for the recovery to be ensured, but so far the Greenback is even failing to reach the given SMA, located around 108.50.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 69% of open positions are long, two percentage points less from Wednesday. The sentiment as reported by SAXO Bank remains bullish - 59% of currently open positions are long, compared to 57% on Wednesday.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to rise above 114 yen
More than half of the surveyed (61%) now assumes that the US Dollar is to cost more than 114.00 yen after three month time. The most popular choice implies that the Greenback is to cost somewhere between 114.00 and 115.50 yen in three months, selected by more than a quarter (30%) of the voters. According to the votes collected between April 05 and May 05, the mean forecast for August 05 is 112.60. At the same time, 25% of the surveyed believe the Greenback could cost between 115.50 and 117.00 yen in three months.
The pair is expected to reach 108.60 by this Friday. The overall sentiment is still bullish, with 68% of all opened positions being long, while attitude towards the greenback is still extremely bullish.
According to Jignesh, a trader with the Dukascopy Community, "last week's price action on the back of an announcement from the BOJ showing some renewed commitment may have traders looking at this pair with the view that the longer term up trend may have continued." He also added that "dips should be supported in this pair as it gets bought up further this week."
At the same time, Trendmaster suggests that the USD/JPY trend was uncertain, as the BoJ was expected to cut its policy rate and scale up its qualitative easing.