- The share of orders to buy the US currency takes up 65% of the market
- 54% of traders still hold long positions
- Closest resistance is located at 126.17, the monthly R1
- From below the price is supported by the weekly PP at 125.07
- 19% of traders assume the US Dollar will cost between 126 and 127.5 yen in three months
- Upcoming events today: G7 Meeting, US JOLTS Job Openings,
Many Federal Reserve officials feel that the economic data is not strong enough to justify raising interest rates this month when they meet on 16-17 June. In addition to that, the International Monetary Fund asked the Fed to hold off raising interest rates until the first half of 2016 due of disappointing growth and a lack of inflation.
Sean Yokota, head of Asia Strategy at SEB, said that "if you look at Japan's public debt, which is about 243% of GDP, which is also one of the largest in the world." The economist 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. Moreover, 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."
G7 Meeting
There will be no significant data releases concerning both, the US and Japanese economies. Nevertheless, the G7 meeting takes place in Germany, where finance ministers and central banks from 7 nations will mostly discuss the Greek debt crisis, but also the foreign policy challenges and global economy. The G7 meeting tends to have high impact on the currency market.
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.
USD/JPY ensured its stay above 125
The US Dollar overperformed on Friday, as it appreciated more than anticipated. The USD/JPY managed to stabilise way above the 125 psychological level and even pierced through the weekly R1. Technical indicators keep giving bullish signs, suggesting the Buck will rise against the Yen for the fourth consecutive time. The closest resistance rests at 126.20, represented by the monthly R1, but trade is more likely to close around 126. Furthermore, the weekly PP at 125.07 should stop the Greenback from falling back under 125.
Daily chart
The USD/JPY succeeded in avoiding the 200-hour SMA, as it edged higher on Friday. The pair also managed to stabilise above the 125 psychological level, which is not allowing the Greenback to fall back in the morning hours. Now this support level is expected to push the US Dollar even higher this week.
Hourly chart
Bullish sentiment unchanged
Both, net positions and net orders remained unchanged. Still 54% of traders hold long positions, while the share of orders to buy the US currency takes up 65% of the market.
The market participants at other brokers appear to be less bullish on USD/JPY. OANDA traders' bullish sentiment is slightly weaker, at 52%, whereas the SAXO Bank traders are also less optimistic towards the Greenback, being that 52% of their positions are long.
Spreads (avg, pip) / Trading volume / Volatility
19% of traders assume the US Dollar will cost between 126 and 127.5 yen in three months
The mean forecast for September 8 is 122.52, however, the majority (70%) still expect the US Dollar to cost more than 120 yen within a three-month period. The most popular price range is now between 126.00 and 127.50 yen, voted for by 19% of participants. The second most popular choice is 123.00-124.50 price intervals, selected by 15% of the surveyed.