- The number of purchase orders slid from 53 to 51%
- 52% of all open positions are short
- Immediate resistance lies at 114.36
- The closest support rests around 114.00
- Upcoming events: US Existing Home Sales, US Markit Manufacturing PMI
US homebuilding activity advanced more than expected in the last month of 2016, official figures revealed on Thursday. The Commerce Department reported housing starts rose 11.3% to a seasonally adjusted annual pace of 1.23 million in December, following the previous month's upwardly revised 1.10 million units and surpassing analysts' expectations for a 1.19 million-unit rate. The December increase suggested the housing market boosted economic growth in the Q4. Meanwhile, building permits came in at a seasonally adjusted annual pace of 1.21 million units in the same month, unchanged from November's upwardly revised reading, slightly missing economists' projections of a 1.22 million-unit rate.
Separately, the Philadelphia Federal Reserve said its Manufacturing Index jumped to 23.6 points in January, the highest level in more than two years, driven by a rise in new orders, which climbed to 26.0 from 14.90. Analysts anticipated a sharp fall to 16.2 points in January from the prior month's 21.5. Data also showed the Employment Index surged to 12.8 from 3.6, while the Business Outlook Index for the next six months hit its highest level since August 2014 of 56.6 points. Other data released on Thursday showed initial jobless claims fell 15,000 to 234,000 last week, the lowest level in more than 43 years.
Quiet beginning of the week
Monday brings no important economic data releases. However, on Tuesday traders can focus on the US Markit Manufacturing PMI, which captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the Manufacturing PMI is an important indicator of business conditions and the overall economic condition in the US. Another possible event to pay attention to will be the US Existing Home Sales, as they provide an estimated value of housing market conditions. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD.USD/JPY attempts to remain above 113.00
Surprisingly, but the USD/JPY currency pair barely experienced any volatility on Friday, having retained its position below the 115.00 handle. The Greenback is now supported by a relatively strong demand area, represented by the weekly PP, the 55-day SMA and the monthly S1, however, the three-week bearish trend-line just above today's opening price appears to be much stronger. As a result, the given pair risks falling back to 113.00, where the weekly S1 and the lower Bollinger band are expected to limit the losses. Technical studies are also in favour of the negative outcome.Daily chart
The down-trend once again prevented the USD/JPY currency pair from edging higher on Friday, which resulted in another leg down. The 200-hour SMA is a weak support, but acts a relatively strong resistance. Together with the 23.60% Fibo, the 200-hour SMA could cause issues for the given pair and prevent it from climbing back over 114.00.
Hourly chart
Bulls and bears broke out of equilibrium, as 52% of all open positions are now short and the remaining 48% are long. At the same time, the number of purchase orders slid from 53 to 51%.
Right now 52% of OANDA clients are bears, compared to 50% on Friday. In the meantime, Saxo Bank clients are barely managing to remain on the bullish side, being that 55% of their open positions are now long and the remaining 45% are short.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish on the Dollar
According to the poll that gathered forecasts between December 23 and January 23, traders expect the US Dollar to appreciate to 118.29 yen in three months' time, while the forecast for November 30 was only 103.30 yen. It is also worth noticing that 58% of all forecasts fall above 117 yen, which is above 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 16% of the survey participants choosing this trading range. At the same time, the second most popular intervals were the 123.00-124.50 and the 124.50-126.00 ones, with 13% of survey participants choosing them.