- Share of buy orders went up from 50 to 59%
- There are significantly more bulls than there are bears
- Pair approaches 200-day SMA at 102.60
- Solid support at 100.70 (50% FIbo plus 2014 low)
- 52% of the survey participants expect the US Dollar to cost less than 108.00 yen in three months
- Upcoming events on Tuesday: US Unit Labour Costs, Non-Farm Productivity, Japanese Core Machinery Orders, PPI
The US non-farm sector created more jobs than expected last month, whereas the unemployment rate remained unchanged, fresh data from the Department of Labor showed on Friday. According to the Bureau of Labor Statistics, the US non-farm payrolls (NFP) increased by 255,000 in July, while market analysts expected the sector to add just 181,000 jobs in the reported period. Meanwhile, the preceding month's figure was revised up to 292,000 from the originally reported reading of 287,000. Furthermore, the headline jobless rate came in at 4.9% in July, in line with last month's figure, whereas economic desks pencilled in a slight deceleration to 4.8%. The report also revealed that average hourly earnings rose 0.3% month-over-month on a seasonally adjusted basis in July, following the 0.1% increase registered in June, while economists anticipated the indicator to come in at 0.2% in the reported month.
On a year-over-year basis, average hourly earnings remained steady at 2.6%, meeting analysts' projections. The NFP report provides important insights into the health of the US economy and offers some clues to the path of future rate hikes. Back in 2012, the Federal Reserve set an unemployment target of 6.5%.
Tomorrow's data to be mixed
Today's Japanese economy watchers sentiment has already surprised to the upside, but considering low significance of the release, this is unlikely to have a noticeable impact on the daily change of USD/JPY, just like the other releases scheduled for Monday. Tomorrow however, there will be a much higher chance of reports eliciting a visible response from market participants. From the Dollar's side of the currency pair, non-farm productivity is to show growth of 0.5% after -0.6% in the previous quarter. On the other hand, according to the consensus of the market, unit labour consts are likely to increase significantly less than 4.5% reported three months ago. From the Yen's side of the pair, core machinery orders are expected to grow as much as 3.4% following disappointing -1.4% a month ago. Another Japanese release will be on producer price index, which analysts expect to preserve more or less the same rate of decline: minus 4.0% after minus 4.2% also a month ago.USD/JPY recovers from 100.70
As the key levels are still intact, the medium-term outlook remains mixed, although near-term risks are skewed to the upside. From one side, the currency pair is in the middle of forming a new bearish wave within a nine-month descending channel. A decline is also implied by the daily and monthly technical indicators. From the other side, a major demand zone between 100.70 and 100.00 stands its ground and suggests a rebound. However, as long as a falling resistance trend-line at 105 yen is above the price, prolonged recovery is unlikely.Daily chart
In the hourly chart USD/JPY is closing in on the long-term moving average at 102.60. There is also a recently estalished down-trend at 103 yen, meaning the price may yet again return to 100.70 before breaching these resistances.
Hourly chart
Positioning in the SWFX market is in favour of a weaker Dollar, since there are significantly more bulls than there are bears—60 and 40% respectively. In the meantime, compared to the previous report the share of buy orders went up from 50 to 59%.
Sentiment at Saxo Bank is virtually the same - 63% of the Denmark-based clients are currently holding long positions. Traders at OANDA are even more confident in Dollar's appreciation - as many as 74% of open positions are long. Using the data as a contrarian indicator, the sentiment implies a cheaper Dollar. There is little room for new buyers to enter the market, and if the bulls start closing positions on profit-taking, this could create a strong selling pressure.
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 (52%) now assume that the US Dollar is to cost less than 108.00 yen after a 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 July 01 and August 01, the mean forecast for November 01 is 106.46. At the same time, 18% of the surveyed believe the Greenback could cost more than 112.50 yen in three months.