- 67% of all pending orders are to purchase the US Dollar
- 53% of all open positions are short
- Immediate resistance lies at 117.90
- The closest support rests around 116.85
- Upcoming Events: US FOMC Meeting Minutes, US ADP Non-Farm Employment Change, US Initial Jobless Claims, US Services PMI
Growth in the US economy's manufacturing sector improved more than expected last month, official figures revealed on Tuesday. The Institute of Supply Management reported its Purchasing Managers' Index advanced to 54.7 in December, surpassing analysts' expectations for 53.7 points. Back in November, the Index climbed to 53.2 from October's 51.9 points. This was the fastest pace of growth seen in five months. Any reading above the 50 point level indicates expansion in the manufacturing sector. Of the 18 manufacturing sectors, 11 reported growth last month, according to Bradley Holcomb, chair of the ISM Manufacturing Survey Business Committee.
Other data released on the same day by the Department of Commerce showed that construction spending grew 0.9% to $1.18 trillion in November, the highest point since April 2006, compared to the previous month's upwardly revised gain of 0.6%. In the meantime, economists expected construction spending to rise just 0.5% in the reported month. The November reading together with the October upwardly revised figure could prompt analysts to revise up their overall US economic growth forecasts for the last quarter of 2016.
FOMC Meeting Minutes is the only upcoming relevant event today
There are no upcoming important fundamental data releases, thus, all focus turns to the FOMC Meeting Minutes later today. FOMC stands for The Federal Open Market Committee that organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.USD/JPY takes another shot at 118.00
The USD/JPY pair was rather volatile on Tuesday, but failed to retain its strength by the end of the day, as trade close with the pair adding only 17 pips. Nonetheless, this was the third consecutive rally and the Buck is set for the fourth, assuming the weekly R1, which is the closest resistance, is breached. Technical indicators keep giving bullish signals, bolstering the possibility of the positive outcome today, but should the FOMC Minutes provide a dovish tone—the Greenback could retreat all the way down to 117.00, where the weekly PP coincides with the 20-day SMA.Daily chart
The pair appears to be now trading in a bullish trend since the end of the previous year, with the trend-line being the only solid support. According to the hourly chart a substantial bearish development is unlikely, although risks are still present.
Hourly chart
Bears gained some numbers over the day, as 53% of all open positions are now short (previously 51%). Meanwhile, 67% of all pending orders are to purchase the US Dollar, compared to 51% on Tuesday.
Right now 56% of OANDA clients are bears, unchanged since Tuesday. In the meantime, Saxo Bank traders reached a perfect equilibrium, being that 50% of their open positions are long and the remaining 50% are short.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish on the Dollar
According to the poll that gathered forecasts between November 30 and December 30, traders expect the US Dollar to appreciate to 118.24 yen in three months' time, while the forecast for November 30 was only 103.30 yen. It is also worth noticing that 62% 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 16% of the survey participants choosing this trading range. At the same time, the second most popular interval were the 111.00-112.50, the 118.50-120.00 and the 123.00-124.50 ones, with 12% of survey participants choosing each of them.