- The number of buy orders slid from 58 to 49%
- Bullish market sentiment takes up 71% of the market
- The 20-day SMA, the weekly and the monthly PPs around 108.50 represent immediate resistance
- Support is around 105.25
- 59% of the survey participants expect the US Dollar to cost more than 114 yen in three months
- Upcoming events: US Average Hourly Earnings, US Non-Farm Payrolls, US Unemployment Rate, US Consumer Credit
The US Dollar managed to outperform most major currencies on Thursday, but struggled against the commodity currencies. The Buck added the most against the Swissie and the Euro, having added 1.05% and 0.72%, respectively. At the same time, the USD/JPY surged 0.23%, while remaining relatively unchanged against the British Pound, edging 0.07% higher. Concerning commodity-based currencies, an increase in oil prices caused the Greenback to fall 0.04% against the Kiwi, 0.11% versus the Aussie and 0.12% against the Loonie.
The number of Americans applying for unemployment benefits increased more than expected last week, recording the biggest gain in more than a year, but the underlying trend still continued to indicate a strengthening labour market. Initial claims for jobless benefits rose by 17,000 to a seasonally adjusted 274,000 in the week ended April 30, according to the Labor Department. Despite the higher-than-expected rise, claims are still near historically low levels. Claims hit a four-decade low of 248,000 in the week ended April 16 week, the lowest level since 1973. Last week was also the 61st straight week that initial claims were below 300,000, extending the longest streak since 1973 amid steady job growth. The four-week moving average of claims, considered a better gauge of labour market trends as it smoothes out week-to-week volatility, increased 2,000 to 258,000 last week.
The Labor Department is expected to report later in the day that nonfarm payrolls advanced by 202,000 jobs in April following a gain of 215,000 in March. The unemployment rate is seen to remain unchanged at 5.0% and average hourly earnings are predicted climbing 0.3% for a second consecutive month. The job market has continued to improve this year, averaging monthly nonfarm payroll gains of 209,000 despite weak first-quarter growth of just 0.5%. Workforce participation is on the rise and the unemployment rate in March was 5%.
Vatsal Srivastava, director at the Blackwater Consulting, explains why the US Dollar is a advancing against the Yen this week. Even though he says that there was nothing fundamentally driving USD/JPY on Monday, one of the key drivers is the falling oil prices, which is actually boosting the Yen, in his opinion, as there is an addition cause for more QQE. Vatsal Srivastava also mentions that "it is going to be a hard economic ride ahead and there seems to be no light on the horizon for Japan as of now". "Lets hope for the best," he added.
US NFP and Unemployment Rate
The most important data today is the US employment data. First of all, the Non-Farm Payrolls, released by the US Department of Labor, which presented the number of new jobs created during the previous month, in all non-agricultural business. The monthly changes in payrolls can be extremely volatile, due to its high relation with economic policy decisions made by the Central Bank. The number is also subject to strong reviews in the upcoming months, and those reviews also tend to trigger volatility in the forex board. Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or bearish), although previous months reviews and the unemployment rate are as relevant as the headline figures, and, therefore, market's reaction depends on how the market assets them all. The Unemployment Rate is also released by the Department of Labor. It is a percentage that surges from dividing the number of unemployed workers by the total civilian labor force. It represents the percentage of people actively seeking employment and willing to work. Usually, as a higher rate is seen in recessionary economies, while on the contrary, a growing economy sees its unemployment rate decreasing. Therefore, a decrease of the figure is seen as positive for the USD, while n increase is seen as negative, although by itself, the number can't determine the markets move, as it depends on the headline reading, namely the NFP.USD/JPY muted ahead of NFP figures
The USD/JPY currency pair not only remained relatively unchanged for the fourth day in a row yesterday, but also prolonged this week's rally. The current bullish trend appears to be fading, largely depending on today's NFP results. A positive reading is likely to cause the Greenback to put the immediate resistance, represented by the 20-day SMA, the weekly and the monthly PPs, to the test. On the other hand, disappointing data could trigger a sell-off, sufficient to reach the 20-month low at 105.20. According to technical indicators, the bearish scenario is to prevail, but the 106.00 mark should also be considered as a possible support area, as it kept the pair elevated this week.Daily chart
The Greenback somewhat consolidated on Thursday, failing to post significant gains or losses for that matter. The upside target is now lower, namely around the 108.00 mark, as the 200-hour SMA keeps declining. Consequently, this suggests that today's NFP data could significantly disappoint and cause the pair to drop even to this week's lowest point.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 68% of open positions are long, one percentage points less from Thursday. Meanwhile, the sentiment as reported by SAXO Bank remains bullish at 59%, unchanged since yesterday.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to rise above 114 yen
More than half of the surveyed (59%) now assumes that the US Dollar is to cost more than 114.00 yen after three month time. The most popular choice implies that the Greenback is to cost somewhere between 114.00 and 115.50 yen in three months, selected by more than a quarter (30%) of the voters. According to the votes collected between April 06 and May 06, the mean forecast for August 06 is 112.49. At the same time, 23% of the surveyed believe the Greenback could cost between 115.50 and 117.00 yen in three months.
The pair is expected to reach 108.60 by this Friday. The overall sentiment is still bullish, with 68% of all opened positions being long, while attitude towards the greenback is still extremely bullish.
According to Jignesh, a trader with the Dukascopy Community, "last week's price action on the back of an announcement from the BOJ showing some renewed commitment may have traders looking at this pair with the view that the longer term up trend may have continued." He also added that "dips should be supported in this pair as it gets bought up further this week."
At the same time, Trendmaster suggests that the USD/JPY trend was uncertain, as the BoJ was expected to cut its policy rate and scale up its qualitative easing.