- Buy commands now take up 56% of the market
- Bullish market sentiment returned to its Wednesday's level of 56%
- Closest resistance is the cluster around 124.10, represented by the 2007 high and the Bollinger band
- From below the price is supported by the weekly R2 and monthly R3 at 123.09
- 64% of traders see USD/JPY above 120 yen in three months
- Upcoming events today: US Preliminary GDP, US Chicago PMI
A separate report showed contracts to purchase previously owned homes increased for a fourth consecutive month in April to the highest level in nine years, buoying the outlook for the housing market. According to the National Association of Realtors, its Pending Home Sales Index, based on contracts signed last month, jumped 3.4% to 112.4. The index now stands at its highest level since May 2006. The upturn comes after a year of solid hiring, which has increased demand to buy houses.
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."
US Preliminary GDP
The Japanese-relevant data has already been released and showed worse-than-expected figures, which resulted in the current US Dollar's surge. However, later today at 12:30 GMT the Bureau of Economic Analysis is to release data on the Preliminary GDP in the US. This is the second GDP release. The growth is expected to drop 0.2% to -0.8%, which indicates a slowdown in economic growth. However, there is a good chance the data will be better than the forecast, thus strengthening the Greenback.
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 struggles to stay above the 2007 high
The USD/JPY currency pair extended its rally for another day, but at a much slower pace than before. However, the US Dollar did surge up to 124.47, almost reaching the weekly R3, but then was pushed back under the 2007 high and stabilised at 123.80. Right now technical indicators are showing bullish signs, suggesting the pair is to rise again today. The Bollinger band and the 2007 high act as an immediate resistance area, but we should not rule out the possibility of a slump back to 123.00, due weak fundamental data expectations.
Daily chart
Despite edging back down under 124 area yesterday, the USD/JPY currency pair still maintains its bullish trend. Latest candles have found support at the trend-line, which is likely to push the pair back above 124. Ultimately, the US Dollar could settled even above 124.15, the 2007 high.
Hourly chart
Bullish still prevailing over bears
Bullish market sentiment returned to its Wednesday's level of 56%. The number of buy orders lost 24 percentage points. The commands now also take up 56% of the market.
The market participants at other brokers appear to be less bullish on USD/JPY. OANDA traders' bullish sentiment returned to its Wednesday's level of 53%. Meanwhile, SAXO Bank traders are even more optimistic towards the Greenback, being that 60% of their positions are long.
Spreads (avg, pip) / Trading volume / Volatility
Almost two thirds see USD/JPY above 120 yen in three months
The surveyed traders are mostly bullish on the Dollar. According to the latest data, 64% of them expect the US currency to cost more than 120 yen after three months. Nevertheless, the largest concentration of answers lies between 123.00 and 124.50, namely 20% them. Meanwhile, the average of the three-month forecasts collected between Apr 29 and May 29 is 121.17.
The sentiment among Dukascopy traders is rather strong for this currency pair, as the average expectation for the end of this week is located around 119.9 level, while 66% of all votes are currently bullish.
A trader with a bullish outlook towards the USD/JPY, rokasltu, mentioned that the pair moved in a strong bullish mode in the last days. He also said that "strong bullish daily candles and the weekly close near 2014-2015 high is so important", suggesting that this indicates that the pair is to have a strong up-trend in the near future. However, khalidamassi, a strider with a bearish outlook, thinks that the Greenbakc advanced too fast against the Yen, and that a correction should take place around 120.