- The portion of orders to acquire the US currency remains unchanged at 56%
- Nearly three quarters (74%) of all open positions are short
- The up-trend and the 20-day SMA are the nearest support around 122.56
- Immediate resistance is at 122.91, represented by the weekly PP
- 60% of the survey participants expect the US Dollar to cost more than 123 yen in three months
- Upcoming events today: Japanese Household Spending, Japanese Tokyo Core CPI, Japanese National Core CPI, Japanese Unemployment Rate
Due to mixed US fundamentals yesterday, the US Dollar experienced mixed performance over the day. The largest gain of 0.50% was recorded against the Swissie, followed by a 0.17% gain against both the Yen and the Euro. Losses of 0.39%, 0.30% and 0.11% were registered versus the Kiwi, the Sterling and the Loonie, respectively, while the Buck also remained relatively unchanged against the Aussie, adding only 0.07%.
Orders for long-lasting manufactured goods rose in October following two months of weakness, while a key category that tracks business investment plans surged the most in three months. Orders for durable goods soared 3% last month, according to the Commerce Department, driven by an increase in demand for commercial aircraft. A key category that serves as a proxy for business investment spending climbed 1.3% in October, the best result since July, suggesting that the worst of the drag from a strong Greenback and deep spending cuts by energy firms was over.
At the same time, the number of Americans applying for jobless benefits declined more than expected last week, indicating that labour market conditions continued to tighten. Initial claims for state unemployment benefits declined 12,000 to a seasonally adjusted 260,000 for the week ended November 21, the Labor Department said. The preceding week data was revised to show 1,000 more applications were received than reported initially. Claims have now remained below the 300,000 threshold for 38 straight weeks, the longest stretch in years, and stayed close to levels last seen in the early 1970s. Claims below this level are usually associated with a resilient jobs market.
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."
Japanese Household Spending
A number of fundamental data are due from Japan by the end of the day today. This data are the final movers to change the intraday trade for the USD/JPY, as there is a bank holiday in the US today. The most important event is the Household Spending, which is released by the Ministry of Internal Affairs and Communications and is an indicator that measures the total expenditure by households. The level of spending can be used as an indicator of consumer optimism. It is also considered as a measure of economic growth. According to the forecast, the Household Spending is expected to grow 0.1%, rebounding from -0.4%. At the same time, the Tokyo Core CPI is also forecasted to improve, thus, boosting the Yen if data managed to meet expectations.
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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 at preserving the up-trend
The Greenback managed to rebound from the up-trend on Wednesday and even tested the immediate resistance in face of the weekly PP. Even though the support remains relatively strong, risks of it getting breached persist, as the trading range between the up-trend and the weekly PP is narrowing. The USD/JPY was unable to pierce the given pivot point through most of the week and is likely to struggle at doing so today as well. However, there is still room for a 20-pip surge and technical indicators are bolstering this outcome.Daily chart
On Wednesday the USD/JPY's rally caused a break of the potential down-trend, but possibly established a new one. The 200-hour SMA caused the pair to start sliding down, whereas a hike towards 122.75 would confirm the new down-trend.
Hourly chart
SWFX sentiment strongly bullish
OANDA and SAXO Bank are similar in the share of their long and short positions. The share of bulls in the market of the Canadian-based broker increased from 58 to 59%, while 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 rate to stay above 123 yen
Bullish forecasts for USD/JPY appear to be the more common than bearish ones. According to the survey conducted in October, 60% of the three-month estimates for the currency pair are above 123 yen. The most popular price interval turns out to be the 124.50-126.00 one, which was chosen by almost a quarter (23%) of cases. However, the second most popular interval, chosen by 12% of the surveyed, was 127.50-129.00. The mean forecast for Feb 26 is now 124.14.
In course of the week forecasts, sentiment among Dukascopy traders became rather strong for this currency pair, as 75% of trades expect bullish development. The average expectation is located around 122.9.
A trader among the bulls, nuonrg, believes that there is a hurdle to take at 124.51 and, thus, he retains a bullish outlook towards the USD/JPY, with a rally into these near term resistances.
Meanwhile, megajorko, another member of the Dukascopy Community, suggests that Japan is currently in stimulus mode, which means that the currency is depreciating. However, "we are close to some all-time highs and until Fed's decision there will be a slight Bearish mood and probably a correction before any major news," he added.