- The share of buy orders surged from 65 to 77%
- 71% of traders are long the Buck
- The weekly PP at 108.16 represents immediate resistance
- Support is at 107.04
- 51% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: US Preliminary UoM Consumer Sentiment, US Federal Budget Balance
The US Dollar managed to post gains against almost all of other major currencies, with the only exception being the NZD/USD pair. The Kiwi added 1.30% against the Buck, retaining its strength after the RBNZ's decision to leave the cash rate unchanged. Nevertheless, the Greenback gained the most against the Euro, adding 0.70%, while also surging 0.55% versus the Swiss Franc and 0.53% versus the Aussie. The Loonie was luckier, as it allowed the American Dollar to gain only 0.24% against it. In the meantime, the Cable inched 0.33% lower, while the USD/JPY edged only 0.10% higher.
First-time jobless claims unexpectedly dropped during the last week while the number of Americans already receiving benefits declined to an almost 16-year low, pointing to sustained strength in the labour market. According, to the US Labour Department, the initial claims for state unemployment benefits declined 4,000 slipping to a seasonally adjusted 264,000 for the week ended June 4. Moreover, this drop is below the consensus of economists who expected the number to rise to 270,000. This was a welcome bit of news after last week's cluster munch. Despite, the May's hiring slowdown, now data is below the 300,000 mark, already for 66 straight weeks, showing the longest streak since 1973. However, still, the hiring slowdown shows a sluggish US economy. Moreover, the US growth came in at an annual rate of 1.4% from October through December and 0.8% from January through March. Moreover, a strong Greenback has hurt American exporters by making their products more expensive overseas, while low oil and natural gas prices have forced energy companies to slash investment.
Overall, the report indicates companies remain reluctant to reduce headcounts even after figures last week showed May was the worst month for hiring in almost six years.
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.
Reuters/Michigan Consumer Sentiment and Federal Budget Balance
On Friday there are only two events that are expected to have some impact on the USD/JPY pair. First of all, the Reuters/Michigan Consumer Sentiment index, which is a survey of personal consumer confidence in economic activity. It shows a picture of whether or not consumers are willing to spend money. Second, the US Federal Budget Balance, which summarizes the financial activities of federal entities, disbursing officers and Federal Reserve banks. A positive budget statement that receipts exceed budgetary outlays is seen as bullish for the USD. On the other hand, a negative figure (deficit) that indicates government debt is seen as bearish.
USD/JPY anchored around 107.00
Even though demand for safe-haven assets, such as the Yen, was higher on Thursday, the USD/JPY still managed to recover from its intraday low and retake the 107.00 level. Overall, the pair appears to be gravitating towards the monthly S1 each time, refusing to remain away from the 107.00 psychological level for long. Meanwhile, technical studies imply that another decline is due, but we should not rule out the possibility of the bullish momentum prevailing, as investors are taking profit on the pair's weakness. Nonetheless, the 38.20% Fibo at 106.65 should be a sufficient demand area to limit the losses, while the immediate resistance at 108.16 remains out of reach.Daily chart
At the end of Thursday the USD/JPY managed to climb over the one-week down-trend, suggesting that the pair might now set off on a path of recovery. The main target will be the 108.00 major level, which is also bolstered by the 200-hour SMA; that area could spark more USD/JPY selling.
Hourly chart
Market sentiment slightly weakened, as 71% of traders are now long the Buck, whereas the share of buy orders surged from 65 to 77%.
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, 59% of positions opened by Saxo Bank traders are long as well, down from 60% on Thursday.
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 (51%) 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 slightly less than a quarter (23%) of the voters. According to the votes collected between May 10 and June 10, the mean forecast for Sep 10 is 112.26. At the same time, 16% 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.