Outlook for Today

Yesterday, the USD/JPY pair confirmed its strength on the downside by achieving a full recovery (144.74->144.09->144.76) after an initial decline. With all time frames – 1 hour, 4 hours, daily, and weekly – showing bullish technical indicators and strong buy signals from “Ichimoku Kinko Hyo Triple Bullish” and “Dow Theory’s upward trend” being in place, it can be concluded that the overall market sentiment is extremely strong from a technical standpoint. From a fundamental perspective as well, differences in monetary policies between Japan and the United States (US interest rate hikes -> buying USD) and the consequent confidence in the continuation of yen carry trades (selling yen) provide materials that suggest further upward movement for the USD/JPY exchange rate.

Although concerns of intervention from the government and Bank of Japan persist, it is expected that any intervention would only be verbal and not involve actual intervention until the level of breaking through the previous high from last year, which was achieved at 151.95. Therefore, we will continue to predict the main scenario of a stronger USD and weaker yen trend (with the assumption of breaking through the year-to-date high of 145.07, as recorded on June 30).

Furthermore, today is filled with several US economic events, starting with the US MBA Mortgage Applications (20:00 GMT), followed by the US June Challenger Job-Cut Report (20:30), US June ADP Employment Report (21:15), US May Trade Balance (21:30), US Weekly Initial Jobless Claims (21:30), remarks from Dallas Fed President Robert Kaplan (21:45), US June Markit Composite PMI Final (22:45), US June ISM Non-Manufacturing PMI (23:00), and US May Job Openings and Labor Turnover Survey (23:00). Among these, particular attention is placed on the US June ADP Employment Report and the US May Job Openings and Labor Turnover Survey. If these figures exceed market expectations, there is a potential for an increase in expectations for the US June Employment Report scheduled for July 7, which could further fuel buying of the USD and selling of the yen during the US trading session. Therefore, caution should be exercised regarding the risk of a sudden surge in the USD/JPY exchange rate during US trading hours.

Expected trading range for today: 144.00-145.75