- The share of buy orders declined from 72 to 64%
- Exactly three quarters of traders now have positive outlook towards the Buck
- Immediate resistance is represented by the Bollinger band around 124.81
- The closest support is located at 124.74, namely the weekly R1
- 23% of traders expect the Greenback to cost between 124.50 and 126.00 yen in three months
- Upcoming events today: US Average Hourly Earnings, US Non-Farm Employment Change, US Unemployment Rate, Japanese Current Account
The Greenback experienced mixed performance on Thursday, as it declined against some major peers and appreciated versus the others. Gains of 0.59% and 0.21% were detected against the Swissie and the Sterling, respectively, whereas the US Dollar declined 0.42% against the Loonie, 0.25% versus the Kiwi and 0.17% versus the Euro. Nonetheless, the Buck remained relatively unchanged against the Aussie, adding 0.07%, and the Yen, losing 0.02%.
The number of Americans applying for jobless benefits rose less than expected last week, suggesting labour market conditions continued to strengthen. Initial claims for unemployment benefits rose 3,000 to a seasonally adjusted 270,000 for the week ended August 1, according to the Labor Department. It was the 22nd successive week that claims remained below the 300,000 threshold, which is associated with a strengthening labour market. Economists had predicted claims to rise to 273,000 last week. The four-week moving average of claims, considered a better gauge of labour market trends as it trips out week-to-week volatility, declined 6,500 to 268,250 last week.
US private employers hired fewer workers in July than expected, reducing expectations of a robust jobs data in the government's payrolls report due Friday. American companies took on 185,000 workers in the reported month, which was the smallest increase since April and compared with economists' forecast for a 215,000 gain. The US Labor Department's more comprehensive non-farm payrolls report is expected to show total US employment to have increased by 223,000 jobs in July. The unemployment rate is seen to remain for a second month at 5.3%, the lowest level since April 2008.
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 Non-Farm Employment Change
The Japanese Monetary Policy Statement had no effect on the market, as the BoJ decided to maintain Abenomics. Therefore, focus now shifts to the US fundamentals, namely the US Non-Farm Employment Change, which is expected to slightly decrease. However, chances are we will see worse-than-expected figures, as the ADP Non-Farm Employment Change dropped a lot more than anticipated on Wednesday. Furthermore, the Average Hourly Earnings could be one of the reasons why the Payrolls declined, thus, poor figures might also turn up in today's release. Finally, the US Unemployment Rate, an important signal of overall economic health, could also rise if there are less jobs employed people expected. Furthermore, on Sunday evening the BoJ is to release the Current Account figures, which would build ground for the exchange rate on Monday.
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 flat between weekly R1 and Bollinger band, risks falling
The USD/JPY currency pair experienced some volatility on Thursday, but ultimately, remained relatively unchanged. The Greenback failed to advance, which resulted in a three-pip decline, as the weekly R1 provided the expected support. Despite the rather strong support, it is likely to be pierced today after employment change data release. The Bollinger band is keeping the Buck from appreciating today and unless there are improvements in the market, the US Dollar could fall to around 124.40. Meanwhile, technical indicators retain their bullish signals, suggesting the pair is to end the week with a rally.Daily chart
The US Dollar suffered minor losses on Thursday, but stopped falling at last week's high at 124.60. The USD/JPY currency pair keeps edging closer to the support trend-line, but it is unlikely to be reached just yet. The overall trend remains bullish, despite today's expectations of the Greenback slumping towards 124.40.
Hourly chart
Bulls still prevailing over bears
OANDA and SAXO clients retain their bullish perspectives towards the Buck. The share of bulls at OANDA remains unchanged at 55%, whereas 63% of SAXO Group clients retain a positive outlook towards the Greenback.
Spreads (avg, pip) / Trading volume / Volatility
23% of traders expect the Greenback to cost between 124.50 and 126.00 yen in three months
According to the survey conducted between July 07 and August 07, 72% of the participants expect the US Dollar to cost more than 123 yen in three months. However, the mean forecast for November 07 is 124.74. Meanwhile, the 124.50-126.00 price interval received the largest amount of votes, chosen by 23% of all poll participants, while the second largest choice, selected by 15% of the surveyed, implies that the US Dollar will cost less than 118.50 yen.
All in all, traders are bullish on the present pair this week, with 60% of responds being optimistic. During this week, on Friday, the Bank of Japan is to announce its benchmark interest rate and publish the rate statement. Later in the day, the US is to round up the week with the closely watched government report on nonfarm payrolls.
Geula4x is on the majority's side of the Dukascopy traders, as he believes the USD/JPY is bullish on the daily chart. "Price has bounced from 123.00 round number support area at July 27, it seems that the Fed principle decision to raise interest rates has strengthened the USD against the JPY", he said. Geula4x also mentioned that resistance lies around 124.50, which has capped the price multiple times, starting at June 17. Nevertheless, aslamhammad has a bearish outlook, as he believes that "on Friday we had a double top in the US Dollar index, so I think by next Friday we will see the USD close lower."