- The portion of buy orders edged down from 57 to 56%
- 63% of traders are long the US Dollar
- Immediate resistance lies around 103.85
- The closest support rests around 102.75
- Upcoming events: US Average Hourly Earnings, US Non-Farm Employment Change, US Unemployment Rate, US Trade Balance
The number of Americans filing for unemployment benefits rose unexpectedly last week, official figures showed on Wednesday. According to the US Department of Labor, initial jobless claims jumped 7,000 to a seasonally adjusted 265,000 in the week ended October 29, the highest reading since the beginning of August. That marked the 87th consecutive week of initial claims below the 300,000 level, the longest streak since 1973. Meanwhile, market analysts anticipated a slight decrease to 257,000 filings from the preceding week's 258,000. The four-week moving average of claims, which is considered a better measure of labor market trends, rose 4,750 to 257,750 last week.
Other data released on Wednesday showed that the Institute for Supply Management's Non-Manufacturing Index declined to 54.8 in October from 57.1 seen in September, while economists anticipated a slighter decrease to 56.2 points. However, any reading above the 50 point-level indicates expansion in the service sector. The Business Activity Index and Employment Index fell to 57.7 and 53.1 in the same month, respectively. Separately, the US Census Bureau said factory orders advanced 0.3% in September, following the prior month's gain of 0.4% and surpassing the 0.2% rise forecast.
US NFP data is the main event
Once again the US NFP data is due. The Non-Farm Payrolls present the number of new jobs created during the previous month, in all non-agricultural business. The monthly changes in payrolls can be extremely volatile, due to its high relation with economic policy decisions made by the Central Bank. The number is also subject to strong reviews in the upcoming months, and those reviews also tend to trigger volatility in the forex board. Generally speaking, a high reading is seen as positive for the USD, while a low reading is seen as negative, although previous months reviews and the unemployment rate are as relevant as the headline figure, and therefore, market's reaction depends on how the markets assets them all. The Unemployment Rate is a percentage that surges from dividing the number of unemployed workers by the total civilian labor force. It represents the percentage of people actively seeking employment and willing to work. Usually, a higher rate is seen in recessionary economies, while on the contrary, a growing economy sees its unemployment rate decreasing. Therefore, a decrease of the figure is seen as positive for the USD, while an increase is seen as negative, although by itself the number cannot determinate the markets move as it depends on the headline reading, the NFP. Another important event is the Average Hourly Earnings. Average Hourly Earnings is a significant indicator of labor cost inflation and of the tightness of labor markets. The Federal Reserve Board pays close attention to it when setting interest rates.USD/JPY under the risk of plunging further
Even though the American Dollar weakened against the Japanese Yen on Thursday, the strong support circa 102.75 managed to limit the losses; however, the 103.00 threshold was still crossed yesterday. Earlier today the USD/JPY pair started a corrective rally after having slumped almost 200 pips this week. The main concern is whether the pair will be able to hold on to these gains or bears are to push the Buck beyond the tough support around 102.75. Apart from political factors the US NFP figures are likely to have the most impact today, the outlook for which is rather poor. Technical indicators cannot confirm either outlook, but we believe risks are skewed to the downside.Daily chart
The hourly chart does not show any solid signs of a possible recovery today. The pair has fallen to the lowest level in five weeks, with no strong supports present up to the 100.75 mark, thus, more bearish momentum is expected to follow.
Hourly chart
Today 63% of traders are long the US Dollar (previously 61%). At the same time, the portion of buy orders edged down from 57 to 56%.
Meanwhile, there has been an increase in the number of long positions at other brokers. Right now 60% of OANDA clients are bulls, compared to 57% on Thursday. In the meantime, Saxo Bank clients are slightly more bullish than on Thursday, being that the portion of longs now takes up 60% of the market.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish the Dollar
According to the poll that gathered forecasts between October 04 and November 04, traders expect the US Dollar to appreciate to 105.73 yen in three months' time, while the forecast for November 30 was only 103.30 yen. It is also worth noticing that 76% of all forecasts fall above 102 yen, which is close to the current spot price. By far the most popular interval is the 108.00-109.50 one, chosen by 18% of all the surveyed, compared to popularity of the 103.50-105.00, 105.00-106.50, 106.50-108.00 and 109.50-111.00 intervals.