- The number of purchase orders dropped to 57%.
- Bearish traders' sentiment remains unchanged at 59%
- The weekly PP at 120.57 remains the nearest resistance
- Immediate support is around 119.50, represented by the weekly S1, the Bollinger band and the up-trend
- 56% of the survey participants expect the US Dollar to cost more than 123.00 yen in three months
- Upcoming events today: US Jobless Claims and Chicago PMI
Although the US Dollar appreciated against most major peers, losses were still detected against the others. The Greenback gained 0.40% versus the Kiwi, 0.26% against the Loonie and 0.12% against the Aussie, thus, advancing against three commodity currencies. At the same time, losses of 0.44% and 0.11% were registered against the Swissie and the Euro, respectively. The Buck also remained relatively unchanged against the Yen and the Sterling, adding 0.05% and 0.01%, respectively.
Contracts to buy previously owned homes in the US dropped in November for the third time in four months, suggesting growth in the housing market may be cooling. According to the National Association of Realtors, pending home sales index fell 0.9% to 106.9, compared with a 0.5% gain expected by economists. In October, pending home sales in climbed 0.4%, revised from a previously reported gain of 0.2%. In annual terms, pending home sales increased at an annual 5.1% rate in November, surpassing expectations for a 4.0% rise and following a gain of 2.3% in the preceding month. Pending home contracts become sales after a month or two, and the decreases in recent months could indicate slower growth in homebuying in 2016, when interest rates are predicted to climb. Mortgage rates have only inched higher since the Fed hiked the benchmark rate by a quarter point on December 16, but policy makers expect to continue raising rates next year.
Furthermore, the NAR reported earlier this month that its more closely watched index, final sales of existing homes plunged 10.5% in November to an annual rate of 4.76 million, the lowest level in 19 months. The NAR pointed to delays triggered by new federal rules, coupled with a tight supply of for-sale homes, as the primary reasons.
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 Jobless Claims and Chicago PMI
The only two relevant economic data releases are the US Jobless Claims and the Chicago PMI. The Initial Jobless Claims are released by the US Department of Labor and are a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labor market. A larger than expected number indicates weakness in this market which influences the strength and direction of the US economy. However, the impact on the market prices is usually rather muted. The second release, namely the Chicago Purchasing Managers Index, is released by ISM-Chicago, Inc; it captures business conditions across Illinois, Indiana and Michigan. This index is an indicator of business trends and it is interrelated with the ISM manufacturing Index. This PMI is likely to be the main driver for USD crosses today..
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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 retests the weekly PP
The USD/JPY managed to appreciate for the third day in a row yesterday, with the weekly PP preventing the pair from further gains. Even though a decline failed to occur on Wednesday, technical indicators insist the Greenback is to weaken against the Japanese Yen today. The weekly PP is reinforcing that view, as it prevented the Greenback from climbing higher through most of the week. The nearest support is represented by the up-trend, the Bollinger band and the weekly S1 around 119.50, but trade is likely to close above the major level of 120.00.Daily chart
The USD/JPY's gains on Wednesday were rather insignificant, that it is uncertain whether the pair extended its consolidation trend or is slowly acquiring a bullish tone. Nevertheless, the 200-hour SMA is edging closer to the spot price and could provide sufficient resistance to push the USD/JPY even lower under 120.00.
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 67% of their traders holding long positions, compared to 66% on Wednesday; while the long and short positions at SAXO Bank now take up 68% and 32% 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 31 and Dec 31 this year, the US Dollar is expected to cost 122.09 yen in three months. However, the most popular price interval is the 123.00-124.50 one, voted for by slightly less than a quarter, namely 24% of the survey participants. The second choice was higher, as 12% of the voters chose the 124.50-126.00 interval. Meanwhile, the majority of 56% 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.