- The share of buy orders inched up from 32 to 61%
- Market sentiment remains bullish at 68%
- The 20-day SMA around 103.11 represents immediate resistance
- Support is at 102.26
- 55% of the survey participants expect the US Dollar to cost less than 108.00 yen in three months
- Upcoming events: FOMC Members Tarullo and Bullard Speeches, US JOLTS Job Openings, US Wholesale Inventories, US Import Prices, US Crude Oil Inventories, US Beige Book, US Federal Budget Balance
The U.S. labour market continued to slow in June but at a more moderate pace as the economy moved closer to full employment, according to an index prepared by the Federal Reserve. The US labour market conditions index registered a 1.9 decline for June from after a revised drop of 3.6 the previous month. This was the sixth successive decline and also a slightly larger than expected decline for the month, maintaining the generally disappointing trend seen for 2016 as a whole. The data could suggest an imminent turning point, but further evidence will be needed to convince markets of a sustained improvement despite the bumper payrolls release last Friday.
The LMCI is a broad composite index of 19 labour-market indicators and it watched closely by the Federal Reserve with Chair Janet Yellen instrumental in setting up the index. The Fed introduced the index in 2014 as a way to measure the labour market's momentum. Moreover, Fed officials have touted the LMCI as a more comprehensive view of the labour market than the one provided by individual data releases from the Department of Labour and other agencies.
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 – the only relevant event today
Today attention could be paid to the US JOLTS Job Openings, which is the number of job openings during the reported month, excluding the farming industry. Although it is released late, it could still have some impact on the market, as job openings are a leading indicator of overall employment. Tomorrow, however, the US Import Price Index is due, which informs the changes in the price of imported products into the US. The higher the cost of imported goods, the stronger the effect they will have on inflation, redunding in a higher probability of a rate rise. Another important event will be the US Beige Book, which reports on the current US economic situation. Through interviews with key business contacts, economics, market experts, and other sources are gathered by each of the 12 Federal Reserve Districts. The survey gives a picture of the overall US economic growth. An optimistic view of those authorities is considered as positive, or bullish for the USD, whereas a pessimistic view is considered as negative, or bearish for the Dollar.USD/JPY attempts to surge further up
In the wake of a weaker Yen the USD/JPY currency pair surged more than 200 pips yesterday, providing a solid confirmation of a six-month trend-line. The US Dollar is now likely to continue outperforming the Japanese currency, retaining Monday's momentum. The 20-day SMA is the closest resistance, but the exchange rate has the potential to climb over the 104.00 major level, where the weekly R2 coincides with the monthly PP. However, we should not rule out the possibility of the pair undergoing a corrective decline, as technical indicators are giving unable to confirm the positive outlook. In this case the weekly R1 at 102.26 will be the nearest level to limit the losses.Daily chart
Strong risk-appetite caused the US Dollar to breach the resistance area around 101.80, with the pair also successfully exceeding the previous week's high of 102.80. The USD/JPY began rather rapidly recovering from post-Brexit decline, with the first target being the 103.40 mark – two-week high.
Hourly chart
Although not as strong as yesterday, but market sentiment remains bullish at 68%. The share of buy orders inched up from 32 to 61%.
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, 60% of positions opened by Saxo Bank traders are long as well, compared to 64% on Monday.
Spreads (avg, pip) / Trading volume / Volatility
Slightly more than a half expect the exchange rate to fall below 108.00 yen
Slightly more than half of the surveyed (55%) now assume that the US Dollar is to cost less than 108.00 yen after three month time. The most popular choice, however, implies that the Greenback is to cost between 108.00 and 109.50 yen in three months, selected by 16% of the voters. According to the votes collected between June 12 and July 12, the mean forecast for Oct 12 is 106.19. At the same time, 12% of the surveyed believe the Greenback could cost either between 99.00 and 100.50, between 100.50 and 102.00 or even between 109.50 and 111.00 yen in three months.