- Pending orders in 100-pip range from the current market price are strongly positive (73% bullish / 27% bearish)
- The pair will likely increase in price, with the closest resistance at 119.38
- The downward movement is still possible, but should be limited by the weekly S1 and monthly PP at 116.91/75
- Upcoming events: US Building Permits, US Housing Starts, US Flash Manufacturing PMI, Japan's Trade Balance
Industrial production in the world's number one economy rose in November as factories increased output of cars, machinery, clothing and other goods, a sign of surging demand for American products amid falling oil prices. Industrial production, which measures the output of US manufacturers, utilities and mines, soared a seasonally adjusted 1.3% from the previous month, according to the Fed. That followed a gain of 0.1% in October, revised up from the earlier reported 0.1% decline. Capacity utilization, an indicator of slack in the industrial sector, rose to 80.1% in November, the highest rate since March 2008 and compared with October's revised reading of 79.3%. Overall industrial output in November increased 5.2% from a year earlier.
Meanwhile, With the Japanese economy struggling to recover after the April's sales tax hike but no obvious contenders proposing a more effective fiscal strategy, voters backed up Prime Minister Shinzo Abe's Liberal Democratic Party on Sunday to proceed with reforms known as Abenomics. In Sunday's snap election, the conservative Liberal Democrats, which have ruled for most of the post-World War II era, was reported to gain a solid majority of at least 291 seats. Abe called the snap elections last month even though his approval ratings were faltering due to several scandals and data that confirmed that the Japanese economy had officially fell into recession.
US building permits expected
It is clear now that Shinzo Abe will continue with his so-called Abenomics; however, it does not mean that there is no other data from the nation, its trade balance will be released in the night from Tuesday to Wednesday. Meanwhile, US building permits and housing starts will be released and also flash manufacturing PMI that is expected to increase from the previous month.
USD/JPY correction can extend to 116.75
At the first half of the year USD/JPY was trading almost completely flat, as it traded around the 102 level. However, at the second part of August the Greenback started to outperform the Japanese peer rather heavily. Recently, the pair breached the 120 mark and for the time being it remains a target for the pair's bulls since the Greenback has slipped below it. Nonetheless, if traders' fail to breach this substantial level then it is likely to trade around 118/119 levels.Daily chart
USD/JPY has extended its correction to 117 level and shortly the pair will face the weekly S1 and monthly PP at 116.91/75 that could halt the decline. Although, its not set in stone that the pair will not fall further, if these support levels fail to do their job. The technical indicators are neutral in all time frames and that could suggest that correction is coming to an end and consolidation could follow.
Hourly chart
Open positions stay neutral, pending orders remain positive
Regarding the orders placed 100 pips from the spot, the concentration of buy orders remain in strong majority, namely 73%. It implies that, if USD/JPY rebounds, in the near-term it may be stopped by the weekly PP and possibly it could push the pair lower.
However, if the pair continue to retreat, most likely it will be stopped by the weekly S1 and monthly PP 116.91/75.
Spreads (avg,pip) / Trading volume / Volatility
Community expects Yen to retreat
Aslamhammad, one of the community members participating in the survey, anticipates the pair to slide slightly lower by stating "I expect USD/JPY to slightly trade lower on this upcoming Friday, as the USD is overvalued against the Yen,and I think we should see a correction soon."
Meanwhile, traders, who were asked regarding their longer-term views on USD/JPY between Nov 11 and Dec 11 expect, on average, to see the currency pair at 121.20 by the mid-March. However, the largest portion of participants, namely 15% of them, believe the exchange rate will gain either to 121.50/123.00 or 124.50/126.00 in sixty days. Only 25% expect the USD/JPY cross to slide below the current market value.