- The share of buy orders slid from 62 to 61%
- 41% of all positions are long today
- The weekly PP at 120.57 remains the nearest resistance
- Immediate support is around 119.60, represented by the weekly S1, the Bollinger band and the up-trend
- 57% of the survey participants expect the US Dollar to cost more than 123.00 yen in three months
- Upcoming events today: US Pending Home Sales and US Crude Oil Inventories
Despite rather strong US fundamentals on Tuesday, the Buck failed to appreciate against some major peers. Gains of 0.51%, 0.45% and 0.42% were registered against the Swiss Franc, the Euro and the British Pound, respectively, while the USD/JPY remained relatively unchanged, adding only 0.05%. However, the Greenback declined against three commodity currencies, namely 0.65% versus the Aussie, 0.44% versus the Loonie and 0.34% against the Kiwi, as a rebound in oil prices strengthened those currencies.
US consumer confidence strengthened in December amid robust economic data and falling unemployment. According to the Conference Board, consumer confidence index rose to 96.5 in December, up from 96.5 in the preceding month. In September, the reading surged to the highest level since August 2007, when consumer confidence came in at 105.6. Steady growth of the world's number one economy, recent decline in the jobless rate and modest growth of retail sales influenced Americans view about the domestic economy, labour market and spending. GDP increased by an annualized 2.0% in the third quarter, beating the forecasts calling for a 1.9% clip, according to the Department of Commerce. In the previous three-month period, the economy had expanded by a much more robust 3.9%.
A separate report showed the US goods trade shortfall shrank slightly in November, as both imports and exports declined, the Commerce Department said. The trade gap narrowed 1.3% in November to $60.5 billion from a revised $61.3 billion in October. Exports of goods decreased 2% to $121 billion in November, while imports declined 1.8% to $181.5 billion, with the drop concentrated in consumer goods.
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 Pending Home Sales is the main price driver today
With the end of the year looming closer, less economic data releases are being scheduled during the weeks. Today there is only one event to influence the USD/JPY currency pair's performance, namely the US Pending Home Sales. The Pending Home Sales are released by the National Association of Realtors and are a leading indicator of trends of the housing market in the US. They capture residential housing contract activity of existing single-family homes. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD. According to the forecast, the volume of Pending Home Sales is expected to increase; thus, if data at least meets expectations the USD then is likely to strengthen..
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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 struggles to breach weekly PP
The Greenback managed to outperform the JPY yesterday, due to the boost provided by the strong US fundamentals. However, still being under relatively high pressure, the USD/JPY barely recovered from intraday losses and climbed only five pips higher, unable to touch the immediate resistance. This resistance in face of the weekly PP is likely to prevent the pair from advancing today as well. Technical studies are bolstering this possibility, but the nearest support lies out of reach circa 119.60, now reinforced by the up-trend. Nonetheless, trade is expected to close around 120.10.Daily chart
The USD/JPY extended its consolidation for another day, but with the bullish momentum slightly prevailing this time. As a result, the Greenback could reach the 121.00 major level by week's end, but the 200-hour SMA just under that area could provide sufficient resistance to limit the gains. At the same time, the trend line should keep the pair afloat in case the USD/JPY falls under pressure.
Hourly chart
Bears dominate the market
OANDA and SAXO Bank are similar in the share of their long and short positions. The portion of bulls in the market of the Canadian-based broker increased today, with 66% of their traders holding long positions, unchanged since Tuesday; while the long and short positions at SAXO Bank now take up 67% and 33% of the market, respectively.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the rate to stay above 123 yen
According to the survey conducted between Nov 30 and Dec 30 this year, the US Dollar is expected to cost 122.25 yen in three months. However, the most popular price interval is the 123.00-124.one, voted for by exactly a quarter, namely 25% of the survey participants. The second choice was higher, as 13% of the voters chose the 124.50-126.00 interval. Meanwhile, the majority of 57% believe that the Greenback is to remain above 123.00 yen after a three month period.
Market sentiment on the present currency cross changed significantly from the previous trading week, as now around 53% of Dukascopy Community members suggest that Dollar will continue appreciating versus the Japanese Yen.
MaziarE, a member of the Dukascopy Community, believes the US Dollar is likely to strengthen against the Japanese currency this week. "In a short term I am expecting bullish development (regards to interest rate), while in a long term- bearish, due to Technical view)," he explained his point of view.
Meanwhile, rokasltu, another Dukascopy Community member has a different opinion. He said that after the Fed raised interest rates the USD/JPY unexpectedly went down. "Thus, I think, present level of 120 points will stay for a while," he added.