- Buy orders now take up 71% of the market
- 58% of traders are long the US Dolla
- 19% of traders expect the US Dollar to cost between 123.00 and 124.50 yen in three months
- The closest support lies around 119.78, namely the weekly PP, while the nearest resistance is located around 119.87, represented by 55-day SMA
- Upcoming events: JOLTS Job Openings, FOMC Member Williams Speech
US job growth rebounded last month after a steep setback in March, adding to signs of a pick up in economic momentum. Nonfarm payrolls rose a seasonally adjusted 223,000 in April, following a revised 85,000 increase in March, down from a previously reported 126,000, according to the Labor Department. Private payrolls were the main contributor to the gain, rising by 213,000, while the government added 10,000 jobs. Consequently, the US unemployment rate declined to 5.4% in April, down from 5.5% a month earlier. The latest data confirmed positive developments. The labour force grew as more Americans entered the job market, and the number of Americans finding work increased. The jobless rate is moving closer to the Federal Reserve's expectation of "full" employment, with unemployment rate between 5% and 5.2%. Wage growth also pointed to a rebound in the world's number one economy. Average hourly earnings rose 2.2% from a year ago.
Despite positive labour market data the Fed is likely to refrain from tightening monetary policy for at least a few more months due to the headwinds to growth from the US Dollar as well as spending cuts in the energy sector, and a willingness among policy makers to get a clear view on the economy's trajectory. The economy expanded by annualized 0.2% in the first quarter, but a report showing a wider-than-forecast trade deficit suggests GDP actually shrank.
Stephen Pope, a managing partner, gives his opinion about the current situation concerning the Bank of Japan. He says that if you want to find any shock revelations about what the BoJ are up to, one actually has to start digging quite deeply into the data. Stephen comments that the data a lot of data mining is required, because at the current time it is uncertain whether the Abenomics, the Three Arrows, are really working. He also adds that "there has been a lot of pressure from the Government on the BoJ to be a heavy intervention machine, so almost sacrificing their independence in order of making Abenomics work and pushing Japan forward."
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 JOLTS Job Openings
There will be no relative events concerning neither the Japanese or the US economies today. However, on Tuesday, the Bureau of Labor Statistics is to release data on the Job Openings in the US. The number of jobs is expected to increase, indicating a growth of overall employment. As a result, the US Dollar is likely to strengthen against the Japanese Yen.
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 takes another crack at 120
After experiencing substantial volatility, the US Dollar still edged up, but not as much as anticipated. The pivot point cluster around 119.64 provided necessary support, but the USD/JPY pair failed to maintain its position above 120. Ultimately, the Greenback added only three pips against the Yen. Nevertheless, the rally is likely to continue today, although the 55-day SMA will probably weaken the surge, preventing the Buck to rise above 120. Meanwhile, technical studies retain bullish signals in all timeframes.
Daily chart
Even after substantial rally at the end of last week, the USD/JPY failed to stay over 120, as the trend-line forced the pair to bounce back. However, the 200-hour SMA now acts as a support, as it managed to prevent the US Dollar from sliding further down. Latest candles show growth, although the pair keeps edging closer to the trend-line again, where resistance is expected to be met.
Hourly chart
Market sentiment remains bullish
Today 58% of traders are long the US Dollar, compared to 60% previously. At the same time, buy orders increased by five percentage points, now taking up 71% of the market.
Market sentiment of OANDA Group improved again, as 65% of traders are now long the Buck. SAXO Group traders' outlook towards the Greenback, on the other hand, lost one percentage point. Today 75% of their positions are long.
Spreads (avg, pip) / Trading volume / Volatility
19% of traders expect the US Dollar to cost between 123.00 and 124.50 yen in three months
The mean forecast for August 11 is 121.02. The vast majority of the survey participants (62%) expect the US Dollar to cost more than 120 yen. The most popular price interval is divided between 123.00 and 124.50 yen, selected by 19% of traders. The second popular price range, 121.50-123.00, chosen by 13% of the surveyed.