- 51% of all pending orders are to purchase the US currency
- Market sentiment is in perfect equilibrium
- Immediate resistance lies at 110.75
- The closest support rests around 109.50
- Upcoming events: US PPI and Core PPI, US Capacity Utilization Rate, US Industrial Production, US NAHB Housing Market Index
US retail sales posted a better than expected increase last month, suggesting economic strength and increasing chances for a December interest rate hike. The US Department of Commerce said on Tuesday retail sales climbed 0.8% on a monthly basis in October, following September's upwardly revised gain of 0.5% and surpassing the 0.5% increase forecast. Year-over-year, retail sales grew 4.3% last month. Excluding volatile items such as motor vehicles and parts, retail sales advanced 0.8% in October, whereas economists expected them to increase just 0.5%.
Meanwhile, the preceding month's reading was revised up to 0.7% from the originally reported rise of 0.5%. The October stronger than expected retail sales supported the view that the Federal Reserve will raise interest rates at its next policy meeting on December 13-14. The last time the Fed increased its key rate was December 2015, and kept its steady since then because of low inflation rates. Back in the Q3, the US economy expanded at an annual rate of 2.9% and it is set to grow 3.1% in the Q4, according to the latest economic growth forecasts released by the Atlanta Fed. As a result, the US Dollar jumped markedly against the Euro, with the EUR/USD pair declining to $1.0733 from $1.0759 ahead of the release.
US data in focus
Once again all attention is on the US fundamentals, such as the PPI. It measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Changes in the PPI are widely followed as an indicator of commodity inflation. Another important event will be the Industrial Production, which shows the volume of production of US industries such as factories and manufacturing. Up-trend is regarded as inflationary, which may anticipate interest rates to rise. Further is the Capacity Utilization Rate. It is the percentage of the US production capacity, which is actually used over the short-time period. It is indicative of overall growth and demand in the US economy. Finally, the NAHB Housing Market Index, as it may have some impact as well. It presents home sales and expected home buildings in the future, indicating housing market trend in the US. The growth rate of the housing market affects the USD volatility.USD/JPY sets eye on 110.00
The USD/JPY currency pair continued to appreciate on Tuesday, successfully piercing the weekly R1 at 108.70, also reaching the ascending channel's upper border. Right now the Greenback is supported by the Bollinger bond, the weekly R1, the monthly R2 and the channel's lower boundary, preventing the exchange rate from sustaining losses. However, the American Dollar is unlikely to put the resistance area around 110.80 to the test, as there is no impetus present for the Buck to jump that far. Moreover, the channel's upper border could stop further appreciation around the 110.00 level.Daily chart
The pair continued to edge higher, as it is seen on the hourly chart, providing the resistance line with an additional confirmation. However, the lower one is still under higher risk of getting breached, and if not today's data, then tomorrow's is expected to trigger sharp movement in either direction.
Hourly chart
Market sentiment reached a perfect equilibrium today. At the same time, the number of pending orders shifted to the positive side, as 51% of them are to purchase the US currency, compared to 47% yesterday.
Meanwhile, there has been a decrease in the number of long positions at other brokers. Right now 53% of OANDA clients are bears, compared to 54% on Tuesday. In the meantime, Saxo Bank clients are as bullish as on Tuesday, being that the portion of longs now takes up 50% 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 16 and November 16, traders expect the US Dollar to appreciate to 107.97 yen in three months' time, while the forecast for November 30 was only 103.30 yen. It is also worth noticing that 55% of all forecasts fall above 108 yen, which is close to the current spot price. The majority of people voted expect the US Dollar to cost somewhere between 111.00 and 112.50 yen in three months, with 29% of the survey participants choosing that trading range. Meanwhile, the second most popular interval is the 105.00-106.50 one, chosen by 15% of all the surveyed, compared to popularity of the 106.50-108.00, 108.00-109.50 and 109.50-111.00 intervals.