- The share of purchase orders increased from 59 to 67%
- Bullish traders' sentiment remains unchanged at 75%
- Immediate resistance is represented by the weekly S1 and 55-day SMA at 123.65
- The closest support is located at 123.30, namely the lower Bollinger band
- 22% of traders expect the Greenback to cost between 124.50 and 126.00 yen in three months
- Upcoming events today: US Markit Manufacturing PMI, FOMC Member Lockhart Speech
The US Dollar sustained rather serious losses amid rising concerns of the Fed postponing a possible interest rate hike. The Buck lost the most against the Euro and the Swissie, namely 1.05% and 0.68%, respectively. Lesser losses were recorded against the Yen (0.39%), the Loonie (0.37%) and the Kiwi (0.36), whereas the Greenback appreciated 0.24% versus the Aussie. Furthermore, the US currency remained relatively unchanged versus the Sterling, having lost only 0.03% against it.
The number of Americans filing new applications for jobless benefits unexpectedly increased last week, but the trend remained consistent with strong labour market momentum. Initial jobless claims, a proxy for layoffs across the country, rose 4,000 to a seasonally adjusted 277,000 in the week ended August 15, the Labor Department reported. The gauge has climbed for four straight weeks. The prior week's figure was revised to 273,000 claims from an initially reported 274,000. The four-week moving average of claims, which strips out week-to-week volatility, rose 5,500 to 271,500 last week, still hovering near the lowest level in 15 years.
Separately, sales of existing homes rose in July to the prerecession pace, but low inventory and higher prices threaten to limit those increases heading into the decline. Existing-home sales surged 2% last month from June to a seasonally adjusted rate of 5.59 million, according to the National Association of Realtors. July's figure was the highest since February 2007 and 10.3% higher than a year ago. Total housing inventory, however, dropped 0.4% last month to 2.24 million existing homes available for sale, and was 4.7% lower than a year earlier. At the current pace of sales it would take 4.8 months to exhaust the supply of homes on the market, compared with 5.6 months in the previous year. The median sale price for a previously owned home fell slightly to $234,000 from $236,300 in June.
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 Markit Manufacturing PMI and FOMC Member Lockhart Speech
Today at 13:45 PM GMT, Markit is to release the US Flash Manufacturing PMI data. A slight improvement is anticipated, although according to historical data, figures have a solid chance to fail meet expectations. As a result, the fundamental data could pressure the USD/JPY deeper down. On Monday, a FOMC Member, Lockhart, is scheduled to speak on the future of the US monetary policy. Volatility is expected during his speech and good news might help the Greenback recover.
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 reaches fresh one-month low
The Greenback sustained serious losses after concerns about the Fed raising interest rates grew. The tough support cluster around 123.60 was pierced, causing the USD/JPY to close trade only at 123.45. The Buck is likely to suffer more weakness today and possibly drop under 123.00 major level; however, a support cluster around 122.90, represented by the weekly S2, monthly PP and the 100-day SMA, should hold the pair from falling deeper. Meanwhile, technical studies retain their mixed signals, while the weekly ones are now showing bullish signs.Daily chart
The US Dollar keeps sliding down against the Japanese Yen. The 123.00 psychological level is holding the pair afloat for now, as it is also bolstered by the July 14 low. The Manufacturing PMI could help the Greenback recover some losses today, while a poor reading could help break the major level and force the USD/JPY deeper down.
Hourly chart
Bulls still prevailing over bears
OANDA and SAXO clients retain their bullish perspectives towards the Buck. The share of bulls at OANDA improved to 63% (previously 60%), whereas 61% of SAXO Group clients retain a positive outlook towards the Greenback, down from 67%.
Spreads (avg, pip) / Trading volume / Volatility
22% of traders expect the Greenback to cost between 124.50 and 126.00 yen in three months
According to the survey conducted between July 21 and August 21, 76% of the participants expect the US Dollar to cost more than 123 yen in three months. However, the mean forecast for November 21 is 125.33. Meanwhile, the 124.50-126.00 price interval received the largest amount of votes, chosen by 22% of all poll participants, while the second largest choice, selected by 19% of the surveyed, implies that the US Dollar will cost more than 130.50 yen.
Participants of the latest quiz for Dukascopy Community Forecasts seem to wait for more negative data to be released, as now almost 63% of votes are set short on the USD/JPY currency pair, widely supporting the Yen.
Among the minority of the traders, namely on the bullish side, WallStreet6 expects the Dollar to edge higher against the Japanese Yen. "I think the Dollar may continue its upward trend amid the September rate hike gaining on probability", he commented. Khalidamassi, a member of the Dukascopy Community, has a different perspective towards the USD/JPY, as for him the pair still seemed bearish, it was unable to break the current weekly highs. "The pair now has negative signs on the weekly chart, but a clear breakdown of 123 will open the door for 120 again", khalidamassi mentioned.