- 52% of orders are to purchase and 48% are to sell the Buck against the Yen
- Bears remain in the lead with 68% of the SWFX market
- Yesterday's high is at 118.20; 200-hour SMA is at 119.15
- Major demand area is seen circa 116 yen
- 58% of the survey participants expect the US Dollar to cost less than 120 yen in three months
- Upcoming events: US Average Hourly Earnings, Non-Farm Payrolls, Unemployment Rate, Trade Balance
Both the Sterling and the US Dollar are the two worst-performing currencies for a second day in a row. The Greenback posted the largest losses against the Swiss Franc and the Japanese Yen - 1.10 and 0.95%, respectively.
The number of Americans applying for unemployment benefits increased more than expected last week, signalling some loss of momentum in the labour market due to a steep economic slowdown and stock market rout. Initial claims for state unemployment benefits surged 8,000 to a seasonally adjusted 285,000 for the week ended January 30, the Labor Department reported. The prior week's claims were revised to show 1,000 fewer applications received than previously reported. Despite the increase last week, claims remained below 300,000, a level associated with strong labour market conditions, for the 48th straight week. That is the longest run since the early 1970s. The four-week moving average of claims, considered a better measure of labour market trends as it strips out week-to-week volatility, rose 2,000 to 284,750 last week. The data came ahead of the government's more comprehensive report on Friday. Economists predict that the report will show employers added 200,000 jobs and the jobless rate remained at 5.0%.
Meanwhile, productivity of US employees declined at the sharpest pace in almost two years toward the end of last year. Output per hour fell at an annualized rate of 3% in the fourth quarter, compared to a 2% plunge expected by the markets, and following a 2.1% increase in the third trimester.
Vatsal Srivastava, director at the Blackwater Consulting, explains why the US Dollar is a advancing against the Yen this week. Even though he says that there was nothing fundamentally driving USD/JPY on Monday, one of the key drivers is the falling oil prices, which is actually boosting the Yen, in his opinion, as there is an addition cause for more QQE. Vatsal Srivastava also mentions that "it is going to be a hard economic ride ahead and there seems to be no light on the horizon for Japan as of now". "Lets hope for the best," he added.
US job growth to slow down
It appears the Yen is not going to matter a lot today, unless the sentiment materially deteriorates. The main focus is the non-farm payrolls, which are expected to decrease substantially, from 292K to 190K. On Wednesday, the ADP non-farm employment change was reported to fall from 267K to 205K. In the meantime, US trade deficit is expected to widen from $42.40 billion to $43.0 billion.USD/JPY approaches 116 yen
USD/JPY violated a yet another monthly pivot, closing 110 pips lower yesterday. As a result, there are no more significant supports separating the pair and the 2015 low, which is expected to trigger a bullish reaction that may take us back to 117.50. In the meantime, if demand at 116 yen fails to stop the sell-off, the next potential reversal point is seen only at 101 yen, namely the 2014 low. And although these are speculations, the BoJ seems unwilling to let the national currency strengthen this much.Daily chart
As the pace of the sell-off decreases, USD/JPY attempts to form a base around 116.60 yen. However, considering the fate of the Feb 3 low, we should probably not expect any notable upward corrections until the rate touches upon demand at 116.
Hourly chart
SWFX sentiment stays bearish; elsewhere sentiment is bullish
Traders at OANDA and Saxo Bank have a diametrically opposite view of the pair's future. Clients of both brokers are mostly bullish. Canadian-based foreign exchange company reports that 72% of open positions are long, and the Danish bank reports that 70% of its clients' positions are long.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 120 yen
The largest half of the survey participants (58%) expect the US Dollar to cost less than 120.00 yen in three months. The most popular choice is the 114.00-115.50 price interval, selected by 27% of the voters; however, according to the votes collected between Jan 01 and Feb 01, the mean forecast for May 01 is 118.56. At the same time, 15% of the surveyed believe the Greenback could fall in the 120.00-121.50 price interval after a three month period.
Traders are getting more upbeat about the pair, as the proportion of optimists advanced to 75% this week from merely 45% a week earlier. The consensus forecast, however, stands for 120.7. Some of the traders believe the advance could be even more impressive, with Jignesh saying "an unexpected rate cut from the BoJ caught everyone by surprise," and adding that "several market participants who were waiting patiently for good levels to look at short positions, will now be buying dips in this pair" and "upside resistance is at 2015 highs." Meanwhile, almost all the traders think the pair will show new highs.
Likerty is bearish on USD/JPY, saying that "the pair retraced last week up into the Fibonacci 50 percent level from the beginning of December 2015" and "it can push towards the 61.8 level."