April 20, 2023

Higher Jobless Claims Sends USD Lower, JP225 Takes Off

Frank Cabibi

The dollar sank this morning as jobless claims came in higher than expected at 245K new claims this week. Last week's report was slightly lower at 240K. This earnings season is mixed as Tesla reported weaker profit margins. USD is also looking weak with poor economic data continuing to roll out.

EdgeFinder Analysis

USDJPY has been on a steady uptrend for the past 4 weeks despite a dollar decline and volatile S&P. The EdgeFinder still puts this pair at a +5 buy with seasonality and trend reading pointing to the upside. The advantage of trading dollar-yen is its correlation to both the dollar and stock market. Dollar strength and stock strength are both good for this pair.

Retail sentiment is still showing a neutral score on the scanner although there is a slight lean to the short side on this pair. The next 3 months have historically been positive on a 10-year average, and so far, the gains have been overall trending upward since the beginning of the year.

EURJPY is another potential play to the long side. This is partly due to smart money showing heavy buy interest in the euro as well as short interest in the yen. This pair is also scored at +5 on the EdgeFinder. EUR fundamental are not as strong as technicals when comparing the two currencies. It's hard to beat Japan in inflation as they carry a negative interest rate. However, the Euro-area is likely subject to a higher economic growth potential than Japan.

On the 1D timeframe, price is pulling back after testing a previous high around the $148s. If a double top is established, we could see a test down towards the $145s. If we see a break however, there could be enough momentum to take price higher towards the $149s.

The Japanese stock market index is one of the strongest scores on the EdgeFinder as well. At a +5 buy rating, most metrics point in the index's favor versus the yen. Seasonality is historically bullish for the market as the trend reading is also plotting a fairly steep projection for the next seven days.

Retail is largely short in the stock market, but smart money is long. Institutions are also short yen. Seasonality is bullish for the next 4 months. Investors may interpret the recent jobless claims as a less hawkish Fed going into May. This could also be bullish for JP225 as the Japanese market index mirrors a lot of the SPX's moves.

Retail Spotlight

The crowd is heavy long kiwi as those currencies are performing the worst today. GBP looks mixed as well as the EUR. It seems like most retail traders are mixed USD too. The crowd's longest on NZDCHF, AUDCHF and EURCHF. They are also mostly short USDZAR, AUDNZD and EURNZD.

Smart Money Spotlight

Just reiterating from Tuesday's report, commodities are the most bought assets on the Smart Money Tracker. The top 3 most bought assets on here are USOil, gold and EUR. It also seems institutions are just as confused when it comes to most of these assets. The most shorted assets are JPY, CAD and CHF.

Fundamental Spotlight

A new format on the Fed Tracker helps make reading the interest and inflation forecasts a little easier. According to these projections, the Fed does not plan to cut back on the interest rate until 2024. It seems like 5.25% is the highest the rate will go, as long as it brings inflation down to the 2% target in the time in which the Fed plans.

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