- The number of purchase orders declined from 77 to 71%
- Traders' sentiment is bullish at 74%
- The weekly S1 at 101.52 represents immediate resistance
- Support is around 101.18
- 53% of the survey participants expect the US Dollar to cost less than 108.00 yen in three months
- Upcoming events: US ADP Non-Farm Employment Change, US Jobless Claims, Japanese Current Account
Good news from the American side, the services sector activity advanced during the previous month from lows where it had been settling during more than two years. Moreover, data managed to beat significantly consensus expectations. The ISM Non-Manufacturing PMI soared to 56.5 points, showing steep growth rather than mediocre growth. It is important to mention, that the May reading had been the weakest release since February 2014, while June's number, in turn, was the highest since October 2015. Although, the employment component, rose from 49.7 to 52.7 points, what is a good sign for the jobs report. The following rebound could imply a jump in jobs, which is highly desirable after May's terrible report. In the meantime, the final June US PMI services-sector data slipped to 51.4 from the flash 51.3, however, markets were expecting a slightly bigger upward revision. The composite index was confirmed at 51.2 from 50.9 previously.
Overall strong doubts surrounding the economic performance will continue to persist, especially, taking into account weak business confidence, despite the ISM data, which was notably more encouraging with a significant monthly improvement in June.
Vatsal Srivastava, director at the Blackwater Consulting, explained why the US Dollar advanced against the Yen last week. He said there was nothing fundamentally driving USD/JPY on Monday, but one of the key drivers was the falling oil prices, which was actually boosting the Yen; in analyst's opinion, as there was an addition cause for more QQE. Vatsal Srivastava also mentioned 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 summed up.
US ADP Non-Farm Payrolls and Jobless Claims, followed by Japanese Current Account
There are not many important events to influence the USD/JPY pair today from the US, namely the ADP Non-Farm Employment Change and the US Jobless Claims. It is a measure of the change in the number of employed people in the US. Generally speaking, a rise in this indicator has positive implications for consumer spending, stimulating economic growth. The Initial Jobless Claims are a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labor market. A larger than expected number indicates weakness in this market which influences the strength and direction of the US economy. Moreover, the Japanese Current Account is due closer to midnight GMT time. It is a net flow of current transactions, including goods, services, and interest payments into and out of Japan. A current account surplus indicates that the flow of capital into Japan exceeds the capital reduction. A current account deficit indicates that there is a net capital outflow from those soruces.USD/JPY: downside risks keep rising
In spite of the USD/JPY nearly reaching the 100.00 level again yesterday, the pair managed to preserve the broadening falling wedge's support line. Technically, we should see the Greenback recover today, as there is no room for another decline without breaching the trend-line. However, technical studies are no longer giving bullish signals, thus, downside risks cannot be ignored, with the final obstacle around 100.50 failing to keep the US Dollar at bay before the 100.00 mark is reached. On the other hand, the given pair retains the potential to recover and retest the weekly PP at 102.46 in the wake of possible strong fundamental data today.Daily chart
As was expected, the USD/JPY currency pair dropped lower on Tuesday, but with the 50.0% Fibo managing to limit the losses. According to the hourly chart, the pair could rebound and climb back above the 102.00 major level today, opposed to the main outlook of the daily chart.
Hourly chart
Bullish traders' sentiment remains unchanged at 74%, but the number of purchase orders slightly declined, namely from 77 to 71%.
There is a small but nevertheless bullish bias among OANDA and Saxo Bank traders as well. In case of OANDA, 66% of positions opened by its clients are long. Similarly, 62% of positions opened by Saxo Bank traders are long as well, compared to 59% yesterday.
Spreads (avg, pip) / Trading volume / Volatility
Slightly more than a half expect the exchange rate to fall below 108.00 yen
Slightly more than half of the surveyed (53%) now assume that the US Dollar is to cost less than 108.00 yen after three month time. The most popular choice, however, implies that the Greenback is to cost between 108.00 and 109.50 yen in three months, selected by 17% of the voters. According to the votes collected between June 07 and July 07, the mean forecast for Oct 07 is 106.66. At the same time, 14% of the surveyed believe the Greenback could cost between 111.00 and 112.50 in three months.