- 63% of orders are to purchase the Greenback
- Three quarters of traders are long
- Upper bound of the near-term channel is at 108.90
- Today's target is 108.10/00
- 52% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events: US Average Hourly Earnings (May), Non-Farm Payrolls (May), Unemployment Rate (May), ISM Non-Manufacturing PMI (May)
The US Dollar was the next best performing currency after the British Pound yesterday. The Greenback grew in value the most relative to the Australian Dollar - 0.38%, while EUR/USD fell by a little more than 0.3%.
According to the latest Labour Department release, the number of Americans applying for unemployment benefits unexpectedly dropped last week to a five week low, pointing to a tightening jobs market. The data for the previous week showed that 267,000 individuals filed new jobless claims. The following data revealed a decline of 1,000 claims from the prior week's level of 268,000. Moreover, the streak of initial jobless claims below 300k resumes a 64 consecutive weeks' period, thus showing the longest since 1973. Moreover, the data was better than the consensus estimate of 270k new claims. Continuing jobless claims, in turn, for the week ended May 21 went up to 2.172 million from 2.160 million in the preceding week. Moreover, the previous week's figure was revised down from 2.163 million. Economists had expected continuing claims to decline further reaching the 2.150 million mark.
Overall, a Labour Department analyst revealed that there were no special factors which have led to the following last week's claims data. However, claims for Tennessee, Virginia, Wyoming, Puerto Rico and Hawaii were estimated because of the Memorial Day holiday. Also it could be added, that last week's claims report has no impact on the employment report for May, which is scheduled to be published today.
Vatsal Srivastava, director at the Blackwater Consulting, explained why the US Dollar advanced against the Yen last week. He said there was nothing fundamentally driving USD/JPY on Monday, but one of the key drivers was the falling oil prices, which was actually boosting the Yen; in analyst's opinion, as there was an addition cause for more QQE. Vatsal Srivastava also mentioned 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 summed up.
Expect high turbulence after 12:30 PM GMT
Friday promises to be a busy day for all the majors. Apart from the non-farm payrolls, which are always released along with the average hourly earnings and the unemployment rate, there is also a report on the services sector of the US economy, published by the Institute for Supply Management. All the figures, except for the unemployment rate, are expected to be slightly weaker than the ones that came out a month earlier.USD/JPY no major obstacles until 107 yen
USD/JPY decided not to pull back after breaking out of the channel and prolonged the decline down to the weekly S2 level. If there is a rally today, as suggested by the daily technical indicators, it is likely to stay limited by the monthly PP and weekly S1 at 109.50/20. The current target is a critical support area between 107 and 106.65 yen, which is formed by the monthly S1, but even more importantly—by the 38.2% retracement of the four-year up-move started back in 2012. Accordingly, the risks are to the upside.Daily chart
There is a channel emerging in the hourly chart of USD/JPY, and for today the pattern implies a decline from 108.90 dollars. However, we must note that importance of the technical levels today is decreased, and the fundamentals will most likely play the main role.
Hourly chart
Most SWFX traders are long USD/JPY
As many as three quarters of the SWFX market participants are planning to profit from a stronger Dollar. And even though the currency may thus seem overbought, 63% of orders placed next to the spot price are to purchase the Greenback against the Japanese Yen.
There is a small but nevertheless bullish bias among OANDA and Saxo Bank traders as well. In case of OANDA, 58% of positions opened by its clients are long. Similarly, 56% of positions opened by Saxo Bank traders are long as well, up from 53% yesterday.
Spreads (avg, pip) / Trading volume / Volatility
Slightly more than a half expect the exchange rate to fall under 114 yen
Slightly more than a half of the surveyed (52%) now assumes that the US Dollar is to cost less 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 (27%) of the voters. According to the votes collected between April 27 and May 27, the mean forecast for August 27 is 110.95. At the same time, 16% of the surveyed believe the Greenback could cost between 115.50 and 117.00 yen in three months.
Dukascopy Community members are optimistic with respect to USD/JPY - 64% of them are bullish on the currency pair, and the average forecast for the end of the week is 111.60 dollars.
One of the bulls, megajorko, does not see dominance of either buy or sell signals, but suspects that "the pair will try to show similar path as the EUR/USD, being attracted by the magic 111.111 number".
In the meantime, Jignesh expects the Yen to strengthen, saying that "central bank are not happy with the BOJ intervening in the markets", which means a probable decline in USD/JPY.