- The number of sell orders increased dramatically, namely from 27 to 73%
- 72% of traders are long the Buck
- The weekly PP at 108.16 represents immediate resistance
- Support is around 107.05
- 56% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: US Revised Nonfarm Productivity, US Consumer Credit, Japanese Current Account, Japanese Final GDP
Yellen's speech on Monday was more hawkish than anticipated, which led to USD strength against most of other major currencies. The best-performing Dollar pair was the USD/JPY, as it surged 0.97%, followed by a 0.54% rally against the Sterling and 0.49% versus the Kiwi. However, the USD/CAD was the worst performer, as it slumped 0.93%. Another notable loss of 0.54% was registered against the Swiss Franc, while the Buck remained relatively unchanged against both the Euro and the Aussie, having edged 0.10% and 0.01% higher, respectively.
According to the latest release, the US labour market conditions index (LMCI) showed a 4.8 decline for the previous month, taking into account a revised 3.4 drop also for May. The following data confirms the fifth successive decrease simultaneously is maintaining a very disappointing trend seen for a whole 2016 year. The freshly release data could provoke fresh doubts whether the Federal Reserve will be able to raise interest rates in the near future even despite the purely negative Friday's employment data. Moreover, following the declines in the previous two months, the overall down-trend has spurred and this is the longest pace below the zero level since the 2007/08 financial crash. There is an important risk that it impossible for companies to find suitable staff, especially as delivery backlogs and longer delivery times has been significant features in recent PMI data which suggests capacity constraints.
Also, On Monday the Federal Reserve Chair Janet Yellen held a speech and drop a hint that interest rate raise still could be possible since positive economic releases have outweighed the negative. Meanwhile, in case if the US economy gives further indications in the upcoming month that it is slowing, any expectations about possible monetary rate increase will disappear.
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.
US Non-farm Productivity and Consumer Credit
Among important economic data releases the most important one to influence the USD/JPY pair today is the US Non-farm Productivity. It is released by the Bureau of Labor Statistics and shows the output per hour of labour worked. Non-farm Productivity indicates the overall business health in the US, which has an influence on GDP. Another event to focus on is the US Consumer Credit, which is released by the Board of Governors of the Federal Reserve. It is an amount of money that individuals borrowed, 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 that means. Furthermore, from Japan the GDP figure is to be released early on Wednesday. The GDP shows the monetary value of all goods, services and structures produced in Japan within a given time period. GDP is a gross measure of market activity, because it indicates the pace at which the Japanese economy is growing or decreasing.USD/JPY sets eye on 108.00
Yellen rather hawkish speech provided support for the US Dollar on Monday, prompting the USD/JPY currency pair to undergo a bullish correction of 95 pips. The Buck is likely to retain its post-Yellen strength and continue appreciating today, with the closest resistance located beyond the 108.00 mark, represented by the weekly pivot point. At the same time, in case of any weakness the monthly S1 and the Bollinger band are to form provide sufficient support around 107.05 to limit the losses. Technical indicators, however, are still giving bullish signals, bolstering the possibility of the positive outcome today.Daily chart
The US Dollar appears to be regaining its bullish momentum after the Friday's sharp slump. The main target will be the resistance line, located just under the 108.00 mark. Upon breaching the pair can extend its recovery until the 200-hour SMA is reached, which is the second target.
Hourly chart
Sentiment keeps weakening, but remains bullish for now, with 72% of traders being long the Buck. Meanwhile, the number of sell orders increased dramatically, namely from 27 to 73%.
There is a small but nevertheless bullish bias among OANDA and Saxo Bank traders as well. In case of OANDA, 69% of positions opened by its clients are long. Similarly, 58% of positions opened by Saxo Bank traders are long as well, down from 60% on Monday.
Spreads (avg, pip) / Trading volume / Volatility
Slightly more than a half expect the exchange rate to rise above 114 yen
Slightly more than a half of the surveyed (56%) 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 exactly a quarter (25%) of the voters. According to the votes collected between May 07 and June 07, the mean forecast for Sep 07 is 112.76. At the same time, 18% of the surveyed believe the Greenback could cost more than 117 yen in three months.