- The number of commands to buy the US currency declined from 54 to 60%
- The share of longs inched up two percentage points up to 62%
- Nearest resistance rests around 123.98, represented by the weekly R1
- The closest support now lies at 123.80, namely the 20-day SMA
- 20% of traders expect the Greenback to cost between 126 and 127.5 yen in three months
- Upcoming events today: US Final GDP, US Final GDP Price Index, US Crude Oil Inventories
The Greenback retains its role of one of the best-performing currencies, with exception against the Aussie. Huge gains of 1.55% and 1.38% were detected against the Euro and the Swissie, respectively, following with lesser ones versus the Sterling (0.62%), the Yen (046%), the Loonie (0.15%) and the Kiwi (0.14%). The US Dollar, however, suffered a minor 0.12% loss against its Australian counterpart.
Orders placed with US factories for long-lasting manufactured goods dropped in May, led by a precipitous decline in demand for aircraft. According to the Commerce Department, total orders for durable goods plunged 1.8% in the reported month following the 1.5% decrease in April, which was also caused by the 35.3% dip in orders for aircraft. However, core durable goods orders, which exclude volatile transportation component, rose 0.5%. A key category that measures business investment plans, orders for non-military capital goods excluding aircraft, climbed 0.4% in May, reversing a 0.3% decline in April. Shipments of core capital goods, a category used to determine quarterly economic growth, rose 0.3% in May to mark the third consecutive increase. The May durable goods numbers are an advance report, which will be a subject to revision when the full report on factory activity is released next week. Last month the full data delivered sizable downgrades to the key capex components.
American factories have struggled this year partly due to a strong Greenback that has made US goods more expensive abroad. Lower oil prices also mean energy firms are purchasing less equipment. So far this year, durable goods orders are down 2.2% from January-May 2014. The category that tracks business investment is down 2.6% through May this year.
Sean Yokota, head of Asia Strategy at SEB comments that the BoJ needs to get the debt down before all the baby boomers retire, so they need to go through some fiscal consolidation, whether through tax hikes or through spending cuts. He also mentioned that such measures put Japan into recession, but he thinks that it also gave a bit of confidence to people; that this time when you increase the taxes, it does hit you short-term, but you can come out of the recession. Overall, Yokota reckons that the Japanese economy is still doing relatively O.K. and the equity markets are still pretty high.
Craig Erlam, Senior Market Analyst at OANDA, commenting on the prospects of the Fed raising interest rates this year, said that there is no real difference between the Fed raising rates either in June or in September. In his opinion September just seems more likely, because it gives the Fed more time to prepare for the hike. Craig also does not see the immediate necessity for a rate hike in September, but thinks that "there is just a number of policymakers who want to test the water with the first hike, see how the markets react, how economy holds up."
US Final GDP
After the Japanese Monetary Policy Meeting Minutes no other relevant data is due today, except from the US side. Although improvements are expected in the US Final GDP, the figure is still forecasted to be negative. If the GDP data manages to show a positive figure, that would only give the Fed confidence to raise interest rates. This sign would certainly boost the American Dollar.Marcel Thieliant, economist from Capital Economics, forecasts USD/JPY to be at 130.00 by the end of the second quarter. The analyst commented that he expects the BoJ to step up the pace of easing at the end of this month. "This is obviously not what other economists expect, if that happens, we will probably see a strong drop in the Yen against the Dollar and against other major currencies," Thieliant said.
Steve Lucas, technical analyst at 3CANALYSIS, gives their perspectives on the USD/JPY currency pair. "We have persistently been bullish of USD/JPY, but in the very short-term we think there will be a pullback", he said. Steve explained their view by mentioning that since the pair posted the 12.5 year high in June, last week put in a bearish reversal candle, which is a negative signal. "We also think that the deception out there is that the Fed is going to be a little easier on raising interest rates and people are going to be a bit cautious and a bit sensible and take the money off the table", the analyst added.
USD/JPY to jump to one-week high
The US Dollar advanced against the Japanese Yen on Tuesday, despite some disappointing fundamental data. Yesterday's gains were limited by the 20-day SMA around 123.85, as well as the weekly R1. Although technical indicators keep giving mixed signals, we still expect the Greenback to edge higher today. This time the 124 major level is likely to be crossed, with the next significant resistance located only at 125.19; however, the Buck will doubtfully reach that high and instead stabilise around 124.50, as that area prevented the rally last week.Daily chart
On the hourly chart the USD/JPY is showing strong bullish signs. After the pair stabilised above the 200-hour SMA, it ensured its uptrend at least in the short-term. The US Dollar keeps appreciating against the Yen, but is having some trouble stabilising above the 124 major level. Once the Greenback succeeds to do so, we might see it reach a one-week high.
Hourly chart
Bulls keep dominating the market
The share of longs inched up two percentage points up to 62%, whereas the number of commands to buy the US currency declined from 54 to 60%.
OANDA and SAXO clients retain their bullish perspectives towards the Buck. The share of longs at OANDA declined from 59 to 57%, while the SAXO Bank's sentiment worsened as well, losing two more percentage points down to 63%.
Spreads (avg, pip) / Trading volume / Volatility
20% of traders expect the Greenback to cost between 126.00 and 127.50 yen in three months
According to the survey conducted between May 24 and June 24, 69% of the participants expect the US Dollar to cost more than 123 yen in three months. However, the mean forecast for September 24 is 124.91. Meanwhile, the 126.00-127.50 price interval received the largest amount votes, namely 20%, while the second choice is on the 124.50-126.00 price range.
The middle of the current week is forecasted to bring some important fundamental data, namely the US Q1 Gross Domestic Product as well as Q1 personal consumption expenditures prices on Wednesday. From the Japanese side, traders could pay additional attention, to the unemployment rate, overall household spending and national core CPI. These data are expected to be announced on Thursday. Traders, however, are equally divided between bulls and bears.
Jignesh, one of the Dukascopy community members, expects the US Dollar to edge higher against the Yen by the end of the week. "The US Dollar is very well supported this week as the index is showing reversal signs around a key retracement", he said. Jignesh assumes the pair will resume its uptrend, as it has been in one of the longest uptrends amongst the majors. Aslamhammad, on the other hand, has a bearish view on the USD/JPY, as the price is moving sideways, in his opinion, and should close around 121.50.