- An overwhelming majority (77%) of the pending orders are set to purchase the US Dollar
- The sentiment among the SWFX market participants is neutral
- Fingraphs.com: USD/JPY to trade in the 1.23-1.25 region in the next few months
- FXPro: 135 is a viable target
- Upcoming events: US Total Vehicle Sales, BoJ Monetary Base
Activity in the US factories lost steam in December, but manufacturers were optimistic entering 2015, believing that the slowdown in growth would be temporary. The Institute of Supply Management's manufacturing PMI fell to 55.5 in December, down from 58.7 registered in the preceding month, indicating deterioration in activity but continuing to show a strong growth. Economists, however, had expected a 57.4 reading. For the year, the manufacturing PMI averaged 55.8, the best reading since the first full year after the 2007-2009 recession. Furthermore, Markit's manufacturing PMI came in at 53.9, against analysts' expectations for 54.0 and down from November's reading of 54.8.
Meanwhile, Cleveland Federal Reserve President Loretta Mester said the Fed could lift interest rates in the first half of the year, which is earlier than some expect, pointing to the fact the US economy is on a firm footing. She predicted a 3% growth this year, as the economy will continue to recover, receiving some boost from oil prices. Mester added that inflation would gradually move back to the Fed's target, triggering interest rates hike. The Fed's benchmark interest rate has been near zero since December 2008. Markets participants generally expect a rate hike around mid-2015 - with many eyeing policy meetings set for June, July and September.
Banking holiday in Japan
Despite the Friday's data on the manufacturing sector of the United States turning out to be disappointing, demand for the greenback appeared to be healthy. There are no important updates scheduled for today, but tomorrow the markets anticipate a more timid services sector figure than reported a month before.
USD/JPY charges at 121
Simon Smith, Chief Economist at FXPro, is expecting the Yen to weaken next year. He does not rule out a possibility of USD/JPY surging up to 135, reasoning that the Japanese government is going to push ahead with the policy measures to prop up economic growth.
Daily chart
As it turns out, USD/JPY is currently neither able to push through the resistance at 121, nor to penetrate the support at 119. Nevertheless, the bias is to the upside—the technical indicators are mostly pointing upwards, and the currency pair is underpinned by the up-trend and monthly PP. Accordingly, the US Dollar should soon re-test the 2014 low while staying within the boundaries of the bullish channel, namely above 119.
Hourly chart
Buy orders on the rise
The sentiment among the SWFX market participants is neutral towards USD/JPY, as the difference between the long (51%) and short (49%) positions is insignificant. OANDA clients seem to have a different view - 59% of open positions are long. SAXO Bank's clients went even further - three fourths of them see the US Dollar appreciating relative to the Yen.
Meanwhile, an overwhelming majority (77%) of the pending orders are set to purchase the US Dollar against the Yen, signifying presence of a solid support.