- The buy and the sell order ratio is equal to one
- The share of longs added two percentage points up to 74%
- 18% of traders expect the US Dollar to 123.00-124.50 yen after a three-month period
- Nearest resistance rests at 119.56, represented by the 20-day SMA, while closest support lies at 119.41, the weekly PP
- Upcoming events: US Durable Goods Orders, US Durable Goods Orders ex Transportation
The number of applications for US unemployment benefits remained below $300,000 for the seventh consecutive week, adding to signs of a rebound in payrolls after hiring declined in March. Employment growth slowed sharply in March, with nonfarm payrolls rising by only 126,000, ending a 12-month streak of gains above 200,000. Jobless claims rose by 1,000 to 295,000 in the week ended April 18, a Labor Department report showed. The four-week moving average of claims, a better measure of labour market trends as it excludes week-to-week volatility, increased 1,750 last week to 284,500. Claims below 300,000 are associated with a strengthening labour market. Yet, Fed officials have said they would like to see further strengthening of the labour market before hiking interest rates. Sluggish economic growth at the beginning of the year has made a June rate hike less possible.
Meanwhile, a separate report by Markit showed activity in the US manufacturing sector declined to the lowest level in three months. Preliminary data revealed the manufacturing PMI fell to 54.2 in April, down from 55.7 and compared with economists' expectations for a 55.5 reading. The output component dropped from the final March read of 58.8 to 55.4, which was also the weakest since January. The sub-index measuring new orders also slid in April, coming in at 55.4, compared with March's reading of 57.2.
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 Durable Goods Orders
The Japanese All Industry Activity Index has already been released. The index showed better-than-expected data, thus strengthening the Yen. However, now the main event for Friday is the US Durable Goods Orders data release. The figures are expected to show improvements, indicating an increase in goods purchases. However, historical data shows disappointment in the portion of orders. The pattern has a solid chance of repeating, thus the Greenback could weaken.
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," he said.
USD/JPY struggles to stay around 119.5
The USD/JPY currency pair behaved almost in accordance with expectations. The Greenback plunged, but not as far as predicted, although the weekly PP was touched during the trading hours. Ultimately, the Buck stabilised just under the 20-day SMA, which should not have had sufficient strength to do so. Technical indicators are bearish, suggesting a further decline today. The weekly PP now acts as the closest support; however, a fall towards 119.25, namely the 100-day SMA, is the prospect for today.
Daily chart
After rising through all of the week, the USD/JPY pair declined yesterday. The ascending channel has been breached to the downside, amid weak fundamental data. Further slump is expected today, while the pair might even reach 119.00 during the trading session. The 200-hour SMA only bolsters the negative outcome, as it has been steadily sliding down since last Friday.
Hourly chart
More bulls on the market
Market sentiment strengthened, with the share of longs adding two percentage points up to 74%. At the same time, the buy and the sell order ratio is equal to one.
OANDA traders' sentiment remained unchanged, with 62% of all positions being long. Meanwhile, SAXO Group traders have a more bullish outlook towards the Buck, as 67% of traders are long the Greenback today.
Spreads (avg, pip) / Trading volume / Volatility
18% of traders expect the US Dollar to 123.00-124.50 yen after a three-month period
The mean forecast for July 24 is 121.06. The majority of traders (61%) expect the Greenback to cost more than 120 yen in three months. The most popular choice was 123.00-124.50, selected by 18% of survey participants, while the second place was taken by 121.50-123.00, voted for by 16% of traders.
Dukascopy traders became more bearish on USD/JPY currency pair, as now almost 57% believe in negative development.
TaoMarx, one of the survey participants, suggests the USD/JPY pair will advance. He commented on his choice, saying that "the pair is showing a consolidation zone on the four-hour chart, but looking bullish on the daily, but as it loses the support, a trend reversal maybe forming." A trader with a bearish perspective, Daytrader21, assumes the USD/JPY will suffer losses, as it is heading towards retesting the 118.00 and then 116.00 levels before another leg higher.