- The portion of buy orders dropped from 61 to 44%
- 63% of all open positions are long
- The weekly R3 at 105.07 represents immediate resistance
- Support is around 104.15
- 60% of the survey participants expect the US Dollar to cost less than 108.00 yen in three months
- Upcoming events: 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 data to have most impact
Today 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. Finally, the US Monthly Budget Statement, 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.USD/JPY makes a U-turn
The USD/JPY currency pair continued to appreciate on Tuesday, easily piercing the second resistance area and even putting the third level to the test. However, the Yen received a boost earlier today, with the bearish trend regaining dominance. The pair is now likely to ignore the nearest support cluster, represented by the monthly PP and the weekly R2, and negate the most part of yesterday's gains. Technical indicators support this scenario, as they are now giving bearish signals in the daily timeframe. The 20-day SMA around 103.10 is the level to limit the losses, although a drop lower is not out of the question.Daily chart
Due to the USD/JPY breaching the down-trend on Monday, more bullish momentum is expected to follow until the 38.20% Fibo at 106.65 is reached. However, risk-aversion could cause temporary setbacks in this scenario.
Hourly chart
Today 63% of all open positions are long, compared to 68% of Tuesday. Meanwhile. The portion of buy orders dropped again, namely from 61 to 44% over the past 24 hours.
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, 55% of positions opened by Saxo Bank traders are long as well, compared to 60% on Tuesday.
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 (60%) 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 19% of the voters. According to the votes collected between June 13 and July 13, the mean forecast for Oct 13 is 105.75. At the same time, 13% of the surveyed believe the Greenback could cost either between 100.50 and 102.00, between 106.50 and 108.00 or even between 109.50 and 111.00 yen in three months.