- 72% of commands are now to acquire the Greenback
- 56% of traders are long the Buck today
- 21% of traders expect the US Dollar to cost between 123.00 and 124.50 yen in three months
- The closest support lies around 119.80, namely the weekly PP and the 55-day SMA, while the nearest resistance is located around 120.50, represented by the Bollinger band and weekly R1
- Upcoming events: US JOLTS Job Openings, US Monthly Budget Statement, FOMC Member Williams Speech
The US labour market continued to falter despite recent rebound in job creation. The Fed's exhaustive measure of the US jobs market remained at the lowest level since mid-2012, reinforcing the view economic growth failed to bounce back at the beginning of the June quarter. The labour market conditions index declined to -1.9 points last month from a steeply downwardly revised -1.8 points in March, which had originally been estimated at -0.3 points, according to the Board of Governors. The gauge is a composite of 19 various measures, of which payrolls and the unemployment rate have the biggest weight. Yet, other indicators such as jobless claims or job openings are included as well, to make the LMCI a multi-dimensional model, which provides a wider picture of the US labour market's state.
Last week the Labor Department's data showed US job growth rebounded last month after a steep setback in March. Nonfarm payrolls rose a seasonally adjusted 223,000 in April, following a revised 85,000 increase in March, down from a previously reported 126,000. Consequently, the US unemployment rate declined to 5.4% in April, down from 5.5% a month earlier. The jobless rate is moving closer to the Federal Reserve's expectation of "full" employment, with unemployment rate between 5% and 5.2%.
Stephen Pope, a managing partner, gives his opinion about the current situation concerning the Bank of Japan. He says that if you want to find any shock revelations about what the BoJ are up to, one actually has to start digging quite deeply into the data. Stephen comments that the data a lot of data mining is required, because at the current time it is uncertain whether the Abenomics, the Three Arrows, are really working. He also adds that "there has been a lot of pressure from the Government on the BoJ to be a heavy intervention machine, so almost sacrificing their independence in order of making Abenomics work and pushing Japan forward."
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 JOLTS Job Openings
All of the Japanese data has already been released, showing improved figures. The upcoming important US event is the JOLTS Job Openings. The number of jobs available is likely to increase, thus boosting the Greenback. The US fundamentals should outweigh the ones in Japan, and ultimately, the US Dollar should strengthen against the Yen.
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" - he said.
USD/JPY aims for the three-week high
On Monday, the USD/JPY currency pair surged beyond expectations. The 55-day SMA resistance proved to be weaker than expected, unable to slow down the rally. As a result, the Greenback went over the 120 barrier and stabilised at 120.12. Technical studies retain bullish signals, suggesting the US Dollar is to rise again today. Immediate resistance lies at 120.52, namely the weekly R1 and the Bollinger band. However, we should not rule out the possibility of a correction towards 119.85, if the fundamentals disappoint.
Daily chart
After rising through Monday, the resistance trend-line was unable to stop the USD/JPY pair from rallying. In the second half of the day the trend-line was easily pierced and the surge extended through Tuesday morning. However, after reaching 120.20, the Greenback started rapidly declining. The 120 psychological level is expected to provide support, and if it fails, the 200-hour SMA should get the job done.
Hourly chart
Market sentiment weaker, but remains bullish
The share of bulls lost two percentage points, as 56% of traders are long the Buck today, whereas 72% of commands are now to acquire the Greenback, compared to 71% yesterday.
Market sentiment of OANDA Group slightly worsened, as 62% of traders are now long the Buck (previously 65%). SAXO Group traders' outlook towards the Greenback remains positive, but with the share of longs down by 11 percentage points, now taking up 64% of the market.
Spreads (avg, pip) / Trading volume / Volatility
21% of traders expect the US Dollar to cost between 123.00 and 124.50 yen in three months
The mean forecast for August 12 is 121.16. The vast majority of the survey participants (64%) expect the US Dollar to cost more than 120 yen. The most popular price interval is divided between 123.00 and 124.50 yen, selected by 21% of traders. The second popular price range, 121.50-123.00, chosen by 13% of the surveyed.