- Sell orders are outnumbering the buy ones by only two percentage points
- 73% of all open positions are long
- The weekly PP at 108.16 represents immediate resistance
- Support is around 106.85
- 56% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: US JOLTS Job Openings, US Crude Oil Inventories, Japanese Core Machinery Orders, US Jobless Claims, US Wholesale Inventories, US Natural Gas Storage
The Greenback weakened across the board on Tuesday, sustaining rather drastic losses against most major peers. The Buck held the best against the Euro and the Japanese Yen, having fallen only 0.03% and 0.18% against them, respectively. At the same time, other significant declines were registered against the Swissie (0.55%), the Loonie (0.64%), the Sterling (0.72%) and the Kiwi (0.80%). The largest loss of 1.24%, however, was detected versus the Australian counterpart, amid the RBA's decision to leave its cash rate unchanged at 1.75%.
The US nonfarm productivity dropped less sharply than previously was forecasted in the first quarter, however labour-related costs still are high since companies employed more workers in order to boost output. According, to the Labour Department, productivity which measures hourly output per worker, contracted at an annualized rate of 0.6% versus the 1.0% pace reported in May. It is worth to point out, that revision is in line with economists' expectations. The unit labour costs also jumped to 4.5% versus an expected unchanged at 4.1%. Meanwhile, weak productivity partially explains the divergence between the economy's performance at the beginning of the year and relatively strong labour market, marked by average monthly job gains of 196,000 in the first quarter. In the meantime, productivity has only advanced in two of the last six quarters and it went up at a 0.7% rate compared to the first quarter of 2015.
By the way, some economists tried to explain weak productivity referring to the changing industry mix, which has experienced a shift from manufacturing and energy toward the production of services. Productivity accelerated at an annual rate of less than 1% in each of the last five years, suggesting the economy's potential rate of growth has losing momentum.
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 JOLTS Job Openings is the only relevant event today
Wednesday is rather poor in terms of economic data releases that could influence the USD/JPY pair. The only possible event will be the US JOLTS Job Openings. It is released by the Bureau of Labor Statistics, it is the number of job openings during the reported month, excluding the farming industry. Even though it is released late, it can still have an impact on the market, because job openings are a leading indicator of overall employment. Early tomorrow the Cabinet Office is also to release the Japanese Core Machinery Orders, which are to set the mood for early trade on Thursday. They are the total value of machinery orders placed at major manufacturers in Japan. They are legally binding contracts between consumers and producers for delivering goods and services. The report is considered the best leading indicator of business capital spending, and increases are indicative of stronger business confidence and, therefore, as larger the number is, the positive it tends to be for the currency.USD/JPY poised for more weakness
The USD/JPY pair was rather subdued on Tuesday, as it experienced only a slight downside reaction over the day, without reaching any significant technical level. However, a stronger-than-expected Japanese GDP figure earlier today boosted the Yen, causing the pair to drop below the 107.00 mark. The support cluster around this area, represented by the Bollinger band, the monthly S1 and the 38.20% Fibonacci retracement is unlikely to let the exchange rate to keep falling. A full recovery from its intraday low would not be a surprise, however, technical indicators turned from bullish to mixed, meaning that the bearish outcome is more probable.Daily chart
As was anticipated, the resistance trend-line on the hourly chart played its part and kept the USD/JPY currency pair from prolonging its recovery. The bullish momentum has once again been lost, but the pair is now in a tight range between the mentioned down-trend and the 38.20% Fibonacci retracement. From this point a breakout in either direction is possible, which is to occur the latest on Thursday.
Hourly chart
Today 73% of all open positions are long (previously 72%), while the sell orders are outnumbering the buy ones by only two percentage points.
There is a small but nevertheless bullish bias among OANDA and Saxo Bank traders as well. In case of OANDA, 63% of positions opened by its clients are long. Similarly, 57% of positions opened by Saxo Bank traders are long as well, down from 58% on Tuesday.
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 more than a quarter (26%) of the voters. According to the votes collected between May 08 and June 08, the mean forecast for Sep 08 is 112.63. At the same time, 17% of the surveyed believe the Greenback could cost more than 117 yen in three months.
Participants of the Dukascopy weekly quiz were largely bullish on the USD/JPY pair, as 63.6% of all votes were positive; however, the average prediction for Friday stayed just above the 110.1 mark.
Khimit, a trader with the Dukascopy Community, suggests that "after a downtrend from 121.65 to 105.609, the pair has found a support level around 106.25." He now expects a range formation in the near time around 108.35 mark on the 10th of June.
Meanwhile, megajorko is bearish towards the USD/JPY pair. "The Yen becomes absolutely unpredictable. The pair has lost all possible stability and there are possibilities of huge spikes to both directions before an eventual move to the all round number 100," he gave his comments.