- The portion of orders to acquire the Buck increased from 53 to 61%
- Bullish sentiment returned to its Monday's level of 74%
- Nearest resistance rests around 123.45, represented by the weekly R1 and monthly PP
- The closest support now lies at 122.85, namely the 20 and 55-day SMAs
- 19% of traders expect the Greenback to cost between 124.50 and 126.00 yen in three months
- Upcoming events today: US PPI and Core PPI, US Empire State Manufacturing Index, US Capacity Utilization Rate, US Industrial Production, Fed Chair Yellen Speech, US Crude Oil Inventories, Member Williams Speech
The US Dollar suffered losses against most major peers on Tuesday. The largest declines were detected against the Sterling (0.96%), the Aussie (0.61%) and the Swissie (0.57%). However, the Buck remained relatively unchanged against the Yen, the Euro and the Loonie, losing 0.02%, 0.07% and 0.10%, respectively.
Retail sale in the US unexpectedly declined in June, questioning strength of the rebound in consumer spending during the second quarter. Sales at retailers and restaurants fell 0.3% from May to a seasonally adjusted $442 billion in June, according to the Commerce Department. Economists, however, had expected a 0.2% gain. Retail sales in May were revised downwards to show a 1.0% growth in the reported month, compared with a 1.2% gain estimated earlier. The fall last month appeared to be broad-based, with sales declining across several categories, including furniture, clothing stores, auto dealers, building materials and garden suppliers. Meanwhile, retail sales, excluding volatile automobiles, gasoline, building materials and food services, slipped 0.1%, whereas economists had predicted a 0.4% rise. Most analysts are forecasting strong consumer spending throughout the second half of the year. Consumer spending makes up more than two-thirds of US economic output. Coming on heels of June's disappointing employment data and steep drop in small business confidence, the weak retail sales data suggests the economy might have lost some steam at the end of the second quarter, having struggled at the beginning of the year.
Another report showed the cost of goods bought abroad declined in June, restrained by automobiles. The import-price index decreased 0.1% last month after rising 1.2% in May, according to Labor Department figures.
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 PPI and Fed's Yellen Testimony
A vast amount of data concerning the US is due later today, with the most important ones being the PPI and Yellen's Speech. The PPI showed signs of improvement in the previous month, after disappointing the previous several times. Nonetheless, the main market mover will be the Fed's Head Speech, who is expected to provide insight on the expected interest rate hike. Economists argue whether the Fed will raise interest rates once or twice this year, some believe the first rate hike is due in September, others believe it will occur not as early as December. Traders will closely monitor Yellen's speech in order to decipher and comprehend what the Fed has in store for the future. From the Japanese side there will be no further data release today, after the BoJ's Monetary Policy Statement today.
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 en route to retake one-month high
The USD/JPY retreated yesterday, but upon reaching the 20-day SMA around 122.89 was slightly pushed back up. As a result, the Greenback stabilised at 123.33 with signs of a possible climb today. The immediate resistance is likely to be breached, as we should see the pair advance towards 124.40, namely the weekly R2 and the upper Bollinger band. Technical indicators, however, are giving mixed signals today, unable to confirm any scenario.Daily chart
The USD/JPY pierced the support trend-line of the ascending channel and, thus, sustained minor losses yesterday. Nevertheless, the bullish momentum was regained, as the pair is seen rising slowly but steadily today, awaiting for the US fundamental data to provide a boost in order to take the 124.00 major level.
Hourly chart
Bulls keep dominating the market
Bullish sentiment returned to its Monday's level of 74%, whereas the portion of orders to acquire the Buck increased from 53 to 61%.
OANDA and SAXO clients retain their bullish perspectives towards the Buck. The share of longs at OANDA returned to its Monday's level of 59%, while the SAXO Bank's sentiment improved today, with 65% of their traders now holding long positions (previously 59%).
Spreads (avg, pip) / Trading volume / Volatility
19% of traders expect the Greenback to cost between 124.50 and 126.00 yen in three months
According to the survey conducted between June 15 and July 15, 61% of the participants expect the US Dollar to cost more than 123 yen in three months. However, the mean forecast for October 15 is 123.79. Meanwhile, the 124.50-126.00 price interval received the largest amount of votes, namely 19%, while the second choice shifted to the 126.00-127.50 price range, chosen by 16% of participants.
As the currency cross managed to hover around the same level from Monday to Friday, Dukascopy traders became much more bullish on their future view of pair's development, being that 62.5% of respondents are now waiting the US Dollar to fall in value. The median forecast for Friday of this week slipped to 123.70 from the current trading level.
Aslamhammad, one of the Dukascopy Community members expects the US Dollar to outperform the Yen today. He back up his statement by saying that "currently, Yen is weak and all pairs have been appreciating against, so my sentiment is bullish for USD/JPY on Friday 17th of July." Rokasltu, on the other hand, still assumes the Yen might weigh on the Greenback. He believes that as the Yen rebounds, the USD/JPY pair will move down towards an important 120 mark, as a deeper correction is possible this week.