- The number of orders to purchase the Buck edged down from 58 to 42%
- There are now 59% of traders being short the US currency
- The weekly PP at 118.30 is the nearest resistance
- Immediate support is at 117.63, represented by the monthly S2
- 61% of the survey participants expect the US Dollar to cost less than 123.00 yen in three months
- Upcoming events today: US Jolts Job Openings, BoJ Gov Kuroda Speech, FOMC Member Fischer Speech, Chinese Trade Balance
The Greenback retained some of its Friday's strength following the NFP release, which helped the US currency to appreciate against most major peers on Monday. Gains of 0.67%, 0.61%, 0.43% and 0.31% were detected against the Swissie, the Euro, the Yen and the Loonie, respectively. At the same time, the American Dollar declined 0.58% versus the Aussie, while the NZD/USD went 0.28% higher. The Cable, however, was seen rising only 0.17%.
Japan logged a current account surplus for the 17th straight month in November, providing much needed support for Prime Minister Shinzo Abe's effort to underpin the world's third biggest economy. Japan's current account surplus came in at 1.14 trillion yen in the reported month, up from 440.2 billion yen a year earlier, according to the Finance Ministry. Economists, however, had predicted a surplus of 895 billion yen. The surplus was driven by an increase in income from investments abroad by Japanese companies as well as rise in services amid an influx of tourists after the Japanese Yen weakened. Services swung into surplus of 61.5 billion yen after being in deficit of 337 billion yen in October. At the same time, in terms of trade Japan continues to run deficits in most months, as exports rise slightly, whereas costs of imports are higher. Exports declined 6.3% on an annual basis in November to 5.92 trillion yen, while imports rose from 6.13 trillion yen to 6.19 trillion yen in the measured month.
Falling oil prices and recent strength of the Japanese Yen, which may push import prices down and improve the trade balance, is predicted to help the economy keep the current account surplus in coming months. The value of crude oil imports plunged about 40.9% as average oil prices declined 47.7% to 47.48 dollars per barrel in the month.
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".
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 JOLTS Job Openings
The Japanese Current Account data disappointed earlier today and set the mood for the USD/JPY recovery. However, focus is still set on the upcoming fundamental event, namely the US JOLTS Job Openings. The US JOLTS Job Openings data is due on Tuesday as well. It shows the number of job openings during the reported month, with exception of the farming industry. Even though it is released late, it might still have a significant impact, as this release is connected with the overall employment. Putting aside the data release, one of the Fed officials and the BoJ's governor are scheduled to speak today; their speeches are also likely to influence the respective currencies either positively or negatively.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 unable shake off Chinese turmoil
The US Dollar retained some if its post-NFP strength and managed to outperform the Japanese Yen on Monday, negating Friday's losses. As a result, the exchange rate climbed back up over the up-trend, but risks of it getting pierced again persist. The monthly S1 keeps bolstering the trend-line, but is failing at providing sufficient support, especially with China weighing on the USD. Consequently, we might see a decline towards the 117.00 level, which is somewhat reinforced by the Bollinger band. However, a rally towards the weekly PP at 118.30 is possible if the fundamentals back the Buck.Daily chart
The US Dollar was unable to edge higher than 118.00 level against the Yen on Monday, after having rebounded from the down-trend. There is still room for a rally, but there is no impetus today to help the Greenback recover and prevent the pair from eventually retesting the down-trend.
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 remains unchanged, as 66% of their traders hold long positions; meanwhile, the long and short positions at SAXO Bank now take up 61% and 39% of the market, respectively.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 123 yen
According to the survey conducted between Dec 12 and Jan 12, the US Dollar is expected to cost 119.78 yen in three months. However, according to the most popular price interval, the US Dollar is likely to cost between 114.00 and 115.50 yen after three months; this price interval was selected by 34% of the voters. The second choice was higher, as 15% of the voters chose the 123.00-124.50 interval. Meanwhile, the majority of 61% believe that the Greenback is to fall below 123.00 yen after a three month period.