- The percentage of long positions in the SWFX market increased to 66%
- The portion of buy orders contracted from 70 to 64%
- 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: FOMC Statement, US Crude Oil Inventories, Japanese Retail Sales
Demand for big-ticked manufactured goods unexpectedly plunged in December, a sign US businesses are cautious to spend even in light of the strong economic recovery. Durable goods orders fell a seasonally adjusted 3.4% in December from the previous month, against economists' expectations for a 0.6% gain, while core capex, which excludes defence and transportation orders, dropped 0.6% in the reported month. However, broader trends point to a modest increase in demand for durable goods, with orders picking up 6.2% in 2014 compared with a year earlier.
A separate report from Markit offset the negative effect from durable goods orders data, as it showed the US services sector started the year on a slightly firmer footing. The services PMI rose to 54.0 in January, up from the previous month's 53.3, which was the weakest reading in ten month. Activity growth in the sector has slowed since the gauge reached a peak of 61 in June, though January's reading is still higher than 50, the threshold that separates expansion from contraction. Meanwhile, new home sales rose more than expected, as purchases of houses soared 11.6% to an annual rate of 481,000 in December, the highest level in more than six years. The data overshot market expectations for a 450,000 gain and followed a revised 431,000 in the preceding month, the Department of Commerce reported.
FOMC Statement; Japanese Retail Sales
Most market participants are likely to look for clues regarding the possibility of the rate hike this year in today's release of the FOMC statement, making this the most important event of Jan 28. However, for now the Committee is not expected to introduce any changes into the wording of the document, and a chance of high levels of turbulence around 19:00 GMT is therefore low. Additional risk event for USD/JPY is the Japanese Retail Sales, the volume of which is estimated to expand by 1.1% after a growth of 0.5% reported a month earlier.
USD/JPY stuck in a sideways trend
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
USD/JPY keeps trading between 119 and 117 for a seventh day in a row, even though the informational background is far from quiet. Eventually the bulls are expected to gain the upper hand and overcome the resistance represented by the monthly PP and 55-day SMA. This should lead to a re-test of the recent highs at 121, then the 2014 high at 122. At the same time, violation of 116 is likely to imply a sell-off, potentially to the up-trend at 113.
Hourly chart
Bullish sentiment strengthens
The percentage of long positions in the SWFX market keeps increasing, it has already reached 66%. As for the orders, the portion of the buy ones contracted from 70 to 64%, signifying that demand subsides.
A similar tendency is observed at OANDA, where the relative amount of long positions went up to 64%. The opposite is happening at SAXO Bank, where only 48% of traders are expecting to profit from the US Dollar's appreciation relative to the Yen.
Spreads (avg, pip) / Trading volume / Volatility
Pair to start bearish correction in April
This week the sentiment of the FX Community members with respect to the USD/JPY pair changed completely to the opposite side, compared to the previous week, as almost 72.7% of all traders are now supporting bearish case for the pair. More than 27% of traders expect the pair to close above the 117.6 level by the end of this working week.