- The share of buy orders slid from 68 to 42%
- 69% of all positions are now long
- The weekly S3 and monthly S1 are the nearest support just under 121.00
- Immediate resistance is around 121.65, represented by the weekly S2, 55, 100 and 200-day SMAs
- 53% of the survey participants expect the US Dollar to cost more than 124.50 yen in three months
- Upcoming events today: US Jobless Claims, US Import Prices, US Federal Budget Balance
The Greenback suffered serious losses against most major peers, caused by a broad USD sell-off during the US trading session. The Buck performed the worst against the Yen and the Euro, declining 1.21% against both; also followed by a 1.14% fall versus the Sterling and the same percentage against the Kiwi. Another notable decline of 0.93% was detected against the Swiss Franc, while the USD/CAD remained relatively unchanged, edging down only 0.04%.
US non-farm payroll growth continued to gather speed from October said, the Bureau of Labor Statistics, as the world's number one economy created 211,000 jobs last month, a solid pace that would help push the economy closer to full employment. Economists had expected the 200,000 increase. The jobless rate remained steady at a seven-year low of 5.0%. The average increase in payrolls over the past three months is now 218,000, the strongest since July. In addition to that, average hourly earnings climbed 0.2% last month, in line with expectations, slowing after a big increase a month earlier. As a result, the 12-month change slid to 2.3%, closer to the trend in recent years.
The jobs report is widely considered as the most significant monthly indicator of economic health, and earlier this week Fed Chair Janet Yellen said she still wanted to see more data before making a decision about a potential rate hike at the FOMC's meeting in less than two weeks. If the Fed raises interest rates for the first time in almost a decade, it would end an unprecedented period of easy borrowing that helped boost investment and spending. Yet, Yellen reiterated that interest-rate hikes will be slow and gradual in the months ahead due to sluggish growth overseas as well as divergent monetary policies between the US and other nations.
In response to the latest Bank of Japan meeting, Stuart Allsop, head of financial market strategy at BMI Research, said that no action from the central bank was expected and that they are likely to "refrain from doing any more stimulus this year". However, he noted that "the risks have increased".
Raig Erlam, senior currency analyst with OANDA, considers that more stimulus from the BOJ is "inevitable", but it is the timing that is yet uncertain. Erlam expects the central bank to hold off this week, but he thinks that "at some point towards the end of the year we may start to see the message being conveyed through to the market that stimulus is coming".
Concerning the GDP growth, the BMI Research analyst doubts that it will "get above 1% anytime in the foreseeable future". The reasons for this are manifold. First, there is "a huge headwind in terms of demographics". Additionally, there is a decline in growth of China coupled with global economic slowdown. However, the main negative factor provided by Allsop is a "very unstable production structure". He explains that the real interest rate is negative, which is "sending contradictory signals to the real economy", and this in turn leads to a low chance of "a productivity boom
As for the Japanese Yen, Allsop is bullish on the currency. In his opinion there are two main contributing factors. The first one is that "investors lose faith in the willingness of the BoJ to act. At the same Allsop adds that the Yen has proven recently its status as a global safe have, and this is beneficial for the value of the currency being that "global financial markets are looking quite shaky", which is negative for the risk sentiment. At the same time, the analyst mentioned that USD/JPY "may fall quite significantly in the coming months", and if this is the case, "this would raise the prospects of intervention from the BoJ."
US Fundamentals to define the USD/JPY's fate
The Japanese BSI Manufacturing Index showed a much weaker-than-anticipated figure, weakening the Yen against the US Dollar. The remaining drivers of the market are the US fundamentams. The Department of the Treasury is to release the US Budget Balance data, where the gap between the income and spending is expected to narrow significantly. The US Jobless Claims are expected to remain and a relatively low level, whereas the change in the price of imported goods and services is forecasted to show deteriorated figures.
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Raig Erlam, senior currency analyst at OANDA, reckons that this week's FOMC statement will be "the Fed's last opportunity to convince the market that rates are still on course to be raise this year". In case they exclude this message from the statement, then "they are not going to raise rates this year and we are probably looking more towards the middle of the next year".
USD/JPY attempts to recover from harsh sell-off
Broad US Dollar selling caused the strong support around 122.30 to be broken, which resulted in the USD/JPY stabilising on the edge of the third support at a one month low. Today the Greenback faces a rather strong resistance cluster, represented by the weekly S2, the 55, 100 and 200-day SMAs around 121.60, which might trigger more weakness and lead the pair down to 121.00, where the weekly S3 coincides with the monthly S1. However, a rebound is also possible, with the Buck climbing over the immediate resistance cluster and closing trade around the 122.00 major level.Daily chart
The USD/JPY currency pair extended its bearish trend and slumped all the way down to 121.10 yesterday. The pair is now attempting to regain its bullish momentum and at least partially recover from this week's losses; however, a powerful catalyst is required.
Hourly chart
SWFX sentiment strongly bearish
OANDA and SAXO Bank are similar in the share of their long and short positions. The share of bulls in the market of the Canadian-based broker improved today, from 55 to 64%, while the long and short positions at SAXO Bank now take up 59% and 41% of the market, respectively.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the rate to stay above 123 yen
The majority of forecasts appear to be centered around the 124.50 price level. However, 53% of traders believe the US Dollar will cost even more after a three month period. The most popular price interval was 124.50-126.00, selected by slightly less than a fifth (18%) of the voters, whereas the second most popular choice is between 126.00 and 127.50 yen, chosen by 15% of the surveyed. The mean forecast for Mar 10 is 123.63.
Traders believe the pair will continue moving to the south, as the consensus forecast stands for 123.9– more than 100 pips above the current market price. At the same time, for the third straight week, around 60-70% of respondents are having bullish view on the pair.
According to csan86, the bears would like to defend the 123.65-123.80 price zone. "This pair is ranging on four-hour and I cannot see any price action which can increase the probability for the breakout," he said, also adding that "if the breakout happens at 125.00-125.25, there can be the next zone where the bears try to defend their positions".
On the other side of the barricade rokasltu suggests that the USD/JPY advance seems to be limited, despite economic data, which signals the Fed's rate increase is quite possible. As a result, he is not expecting big movements during this week, but still goes for a slight decline of the pair.