- The portion of buy orders decreased from 56% to 55%
- Market sentiment remains bearish at 54%
- Immediate resistance lies around 117.40
- The closest support rests around 116.50
- Upcoming Events: US CB Consumer Confidence; US Richmond Manufacturing Index
Japan's household spending went down 1.5% on a yearly basis in November for the ninth month in a row amid stagnant wages, hinting the challenge Prime Minister Shinzo Abe's government faces in reinvigorating the economy. Separate data showed that Japanese core consumer prices also posted the ninth straight month of annual declines in November, suggesting that the economy still lacks enough momentum to jump-start inflation toward the central bank's ambitious 2% target. Moreover, Tokyo officials have blamed external factors, such as falling energy prices and uncertainty related to emerging economies, for their failure to achieve a promised stated above inflation target. In the meantime, the Japanese economy may finally be getting some relief in the form of a weaker yen. It is worth to point out that Japanese currency has dropped roughly 12% against the US dollar since the November 8 presidential election. Losses have accelerated since the Federal Reserve's decision to raise US interest rates on December 14. Moreover, the yen's weakness is predicted to continue in the new year since central banks in Washington and Tokyo continue to diverge on monetary policy.
Existing home sales in the United States rose for the third consecutive month in November, surprising markets and hitting their highest level for almost a decade. According to the National Association of Realtors, home resales advanced 0.7% to an annualized rate of 5.61 million units in the reported period, following October's downwardly revised rate of 5.57 million, surpassing analysts' expectations for a slight decline of 1.0% to a 5.52 million-unit pace and reaching the highest since February 2007. On an annual basis, sales increased 15.4% in November. According to the latest data published by Freddie Mac, the fixed 30- year mortgage rate has climbed around 60% to an average rate of 4.16% since Donald Trump's victory in the US presidential election. Moreover, mortgage rates are likely to go even higher after the Fed rose its key interest rate to 0.75% from 0.50% last week as well projected three more hikes in 2017. Separately, the Energy Information Administration announced on Wednesday a 2.3 million barrel increase in US crude oil inventories during the week ending December 16, while market analysts anticipated a decline of 2.4 million barrels, following the preceding week's 2.6 million barrel slip.
US data might move the rate
There are some notable data releases scheduled for Tuesday. The S&P/CS Composite- 20HPI is set to be out at 14:00 GMT. However, trader should keep their eyes open at 15:00 GMT, when the CB Consumer Confidence will be released together with the Richmond Manufacturing Index. Although, the consumer confidence index is of the utmost importance on Tuesday.USD/JPY rebounds from 117 mark
The US Dollar did not depreciate further against the Japanese Yen on Tuesday. A fall of the currency exchange rate was indicated by the technical data. However, a rare event occurred that affected the currency pair. Fundamental data affected a currency exchange rate on a daily timeframe. To be precise, it was the US housing starts, which were so low that the fall of the USD/JPY stopped. As a result an attempt to break through the weekly PP at 117.39 even occurred. Due to that traders are advised to review their short term forecasts.Daily chart
The hourly chart reveals that the rate rebounded purely out of fundamental reasons. It surged past various levels until it was stopped by the 100-hour SMA and a descending channel's upper trend line at 117.42. Since then the rate seems to continue moving lower, as it is directed south by the 100 and 55-hour SMAs.
Hourly chart
Trader sentiment remains unchanged, as 54% of traders shorted the US Dollar on Tuesday. Meanwhile, trader set up orders were bullish, as 55% of pending commands were set up to buy the Greenback.
Right now 54% of OANDA clients are bears, compared to 55% on Friday. In the meantime, Saxo Bank traders have become neutral/bullish with 51% of open positions being long.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish on the Dollar
According to the poll that gathered forecasts between November 27 and December 27, traders expect the US Dollar to appreciate to 118 yen in three months' time, while the forecast for November 30 was only 103.30 yen. It is also worth noticing that 60% of all forecasts fall above 117 yen, which is close to the current spot price. The majority of people voted expect the US Dollar to cost somewhere between 120.00 and 121.50 yen in three months, with 17% of the survey participants choosing this trading range.