- 64% of open positions are long
- Buy orders are in a majority with 61%
- Fingraphs.com: USD/JPY to trade in the 1.23-1.25 region in the next few months
- FXPro and Caxton FX: USD/JPY to aim for 135
- Upcoming events: US Manufacturing PMI, Existing Home Sales, Japan's Trade Balance and BoJ Meeting Minutes on Sunday
The number of people applying for US-state unemployment benefits dropped last week from the highest level in seven months, with the underlying trend pointing to consistent improvement in the US labour market. Initial jobless claims across the country declined to a seasonally adjusted 307,000 in the week ended January 16, down from last week's revised 317,000, according to the Department of Labor. The four-week moving average of claims, considered a better gauge of labour market performance as it strips out week-to-week volatility, advanced 6,500 last week to 306,500, breaking above the 300,000 level for the first time since September. Meanwhile, continuing claims for the week ending January 10 rose slightly and came in at 2.443 million, compared to last week's reading of 2.428 million. Employment gains have exceeded 200,000 in each of the last 11 months, the longest such streak since 1994, and job openings remain near 14-year peak. In addition to that, the ratio of unemployed people for every job opening is the lowest since early 2008.
The US unemployment rate slid to 5.6% in December, down from 5.8% in November, reaching the lowest level since June 2008. The US economy created nearly three million jobs last year. The trends in the US labour market will play a key role in the central bank's decision making process regarding monetary policy normalization.
Next piece of Japanese data to be released on Sunday
The new portion of news on the Japanese economy (BoJ Meeting Minutes and Trade Balance) is expected only on Sunday. Still, USD/JPY is exposed to the impact of the US Manufacturing PMI and Home Sales that are to be released today. Both indicators are expected to show improvement.
USD/JPY rebounds from 118
Simon Smith, Chief Economist at FXPro, is expecting the Yen to weaken next year. He does not rule out a possibility of USD/JPY surging up to 135, reasoning that the Japanese government is going to push ahead with the policy measures to prop up economic growth.
Nicholas Ebisch from Caxton FX shares a similar view, anticipating moderate appreciation of the US Dollar against the Yen over the next 12 months. He forecasts the currency pair to go up to 122 in a month, subsequently reaching a target of 125 by April. According to the analyst, by the end of 2015 the rate may well achieve the level of 135, on the condition the US macroeconomic indicators do not fall behind the expectations and the Japanese officials introduce more easing measures to prompt up inflation.
Daily chart
As expected, USD/JPY confirmed the support at 118. However, the bullish momentum is still fragile, being that the resistance at 119, mainly represented by the monthly pivot point, remains intact. If this supply level is not breached in the nearest future, the price may well return back to 116, where the monthly S1 together with the 38.2% Fibo will once again try to save the positive outlook for the US Dollar.
Hourly chart
Sentiment different across the brokers
At the moment there are considerably more people in the SWFX market believing the buck is going to outperform the Yen, as 64% of open positions are long. The buy orders are in a majority as well, taking up 61% of the total number of pending commands.
The bulls have a significant advantage at OANDA too - there they take up 60% of the market. As for the SAXO Bank clients, they remain undecided with respect to USD/JPY - 49% of open positions are long and 51% are short.
Spreads (avg, pip) / Trading volume / Volatility
Overwhelming majority sees USD/JPY above 117
Concerning the weekly forecasts, nearly 29% of the FX Community members participating in the survey expect USD/JPY to stay between 118.3 and 116.4 by the end of Friday. Pazner is motivating his bullish forecast by expecting the ECB programme to be positive for the pair. Alternatively, WallStreet6 sees a possibility of "a more serious further retracement downwards", as "USD/JPY has been trading much lower than during the peak".