- The number of orders to purchase the Buck declined to 68%.
- Bears take up 71% of the market
- The weekly PP is the nearest support around 122.74
- Immediate resistance is at 122.86, represented by the 20-day SMA
- 56% of the survey participants expect the US Dollar to cost more than 124.50 yen in three months
- Upcoming events today: US ADP Non-Farm Employment Change, US Revised Nonfarm Productivity, US Crude Oil Inventories, Fed Chair Yellen Speech, FOMC Members Lockhart and Williams Speeches, US Beige Book
The Greenback appreciated against most major peers, boosted by a rather strong reading of the ADP Non-Farm Employment Change yesterday. The US currency added the most versus the Sterling, namely 0.87%, while also posting solid gains of 0.54% against the Kiwi and 0.30% versus the Yen. However, the Buck also suffered losses against the Swiss Franc, edging down 0.74%, while remaining relatively unchanged versus the Loonie (0.11%).
American companies created more jobs than expected in November, a further sign that the US labour market continued to strengthen. The number of Americans employed in the US private sector surged by 217,000, the biggest gain in five months and followed a 196,000 increase in the preceding month, according to the ADP Research Institute. Companies are adding employees and retaining those already employed as a tighter labour market makes it difficult for them to find skilled and experienced workers. Fed policy makers are closely watching progress toward full employment as they consider whether the world's largest economy is strong enough to weather an increase in the benchmark interest rate, a decision that may unfold in two weeks.
The ADP report precedes a more comprehensive government November jobs report, that is expected to show employment growth cooled to a more sustainable level after an October increase. Companies took on 200,000 workers in November following a 271,000 increase in the previous month that was the most this year, according to the median forecast of economists.
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 ISP Non-Manufacturing PMI
The US Services PMI, or the ISM Non-Manufacturing PMI, is scheduled to be released later today. Although according to the forecast the PMI is likely to drop a little, the US Factory Orders are expected to rebound after a rather serious slowdown in October's release. The Factory Orders could turn the tables around in the fundamental market movers today, but the main non-data release event is the Fed Chair's Speech today, scheduled at 15:00 PM GMT (as well as the Services PMI and the Factory Orders). Any hints concerning the Meeting Minutes and the possible rate hike decision later this month are likely to cause volatility in USD crosses. At the same time, no significant data releases concerning the Japanese economy are due 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 keeps struggling to preserve up-trend
The US ADP Employment Change data provided the Greenback with a sufficient boost to reclaim the area above the up-trend yesterday. Today the USD/JPY remains supported by the trend-line, now also reinforced by the weekly R1, but the tide might still turn in wake of no bullish impetus from the fundamentals. The closest cluster to limit the possible rally is formed by the Bollinger band and the weekly R2 around 123.70, whereas a breach of the up-trend could cause the exchange rate to edge closer to the weekly PP at 122.74.Daily chart
The USD/JPY extended its gains on Wednesday, moving further away from the new up-trend. However, as the pair approaches the Nov high at 123.75, risks of bears taking over rises. A drop below the up-trend for now is unlikely, as the 200-hour SMA is now providing additional support near that area.
Hourly chart
SWFX sentiment strongly bearish
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 decreased from 59 to 58%, while the long and short positions at SAXO Bank now take up 51% and 49% of the market, respectively.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the rate to stay above 123 yen
The majority of forecasts appear to be centered around the 124.50 price level. However, 56% of traders believe the US Dollar will cost even more after a three month period. The most popular price interval was 124.50-126.00, selected by a fifth (20%) of the voters, whereas the second most popular interval was 126.00-127.50, chosen by 11% of the surveyed. The mean forecast for Mar 3 is 123.98.
Traders are getting less optimistic about the pair, as the proportion of optimists slipped to 64% this week from almost 75% a week earlier.
Panzer, a member of the Dukascopy Community, suggests that the USD has a strong upward trend against all currencies in your shopping cart. However, "due to some problems lately in some regions of the world, resort to resort. Yen again gets the label of refuge, so the USD/JPY is currently balanced in a narrow range, due to the falling EUR/JPY and GBP/JPY," he commented.
Jignesh believes the US Dollar is to weaken against the Japanese Yen by the end of this week. He backed his view with the following comment: "The USD/JPY is still not able to clear the overhead resistance that has come in the form of a down trendline. Downside pressure will be on the pair again this week, as it's struggling in this area for a few weeks now."