- All pending orders are equally divided between the buy and the sell ones
- Bulls remain rather strong, taking up 62% of the market
- Weekly PP represents resistance at 120.01
- Support is at 119.70 (up-trend)
- 75% of traders see the Dollar higher than 120 yen on Dec 21
- Upcoming events today: US Existing Home Sales, FOMC Member Lockhart Speech
The Greenback advanced against most major peers, but still suffered an insignificant loss of 0.07% versus the Yen and 0.17% against the Kiwi. Gains 1.01% and 0.77% were registered against the Euro and the Swissie, respectively, while also adding 0.32% against the Loonie and 0 .26% versus the Sterling. The GBP/AUD remained relatively unchanged, adding only 0.01%.
he Bank of Japan's minutes from the central bank's meeting on August 6 and 7 showed that the members of the monetary policy board maintained their optimistic views over the country's economic recovery, saying that the weakness in Japan's output and exports was temporary. As it was already announced earlier last week, the BoJ decided to keep its monetary policy unchanged and also maintained its inflation and economic growth outlook. However, the nine-member board agreed that the central bank must be vigilant to the risk of a decline in exports from a prolonged slowdown in China and other emerging economies. In the meantime, policymakers concurred that emerging economies had suffered from a weak growth, but were likely to improve from a longer-term perspective.
Meanwhile, inflation in Japan is likely to be about 0% for the time being amid the renewed declines in oil prices as well as sluggish private consumption, raising further doubts concerning the BoJ's forecast that inflation will hit its 2% target by September next year. Core inflation, which excludes volatile energy prices, was at meagre 0.1% in June.
In response to the latest Bank of Japan meeting, Stuart Allsop, head of financial market strategy at BMI Research, said that no action from the central bank was expected and that they are likely to "refrain from doing any more stimulus this year". However, he noted that "the risks have increased".
Concerning the GDP growth, the analyst doubts that it will "get above 1% anytime in the foreseeable future". The reasons for this are manifold. First, there is "a huge headwind in terms of demographics". Additionally, there is a decline in growth of China coupled with global economic slowdown. However, the main negative factor provided by Allsop is a "very unstable production structure". He explains that the real interest rate is negative, which is "sending contradictory signals to the real economy", and this in turn leads to a low chance of "a productivity boom
As for the Japanese Yen, Allsop is bullish on the currency. In his opinion there are two main contributing factors. The first one is that "investors lose faith in the willingness of the BoJ to act. At the same Allsop adds that the Yen has proven recently its status as a global safe have, and this is beneficial for the value of the currency being that "global financial markets are looking quite shaky", which is negative for the risk sentiment. At the same time, the analyst mentioned that USD/JPY "may fall quite significantly in the coming months", and if this is the case, "this would raise the prospects of intervention from the BoJ."
US Existing Home Sales
With a bank holiday in the Japan for the next three days, all focus is turned to the fundamentals from the US side. However, the beginning of the week is not rich in terms of fundamental data, leaving us with the Existing Home Sales and the Speech of FOMC Member Lockhart.
Marcel Thieliant, economist from Capital Economics, forecasts USD/JPY to be at 130.00 by the end of the second quarter. The analyst commented that he expects the BoJ to step up the pace of easing at the end of this month. "This is obviously not what other economists expect, if that happens, we will probably see a strong drop in the Yen against the Dollar and against other major currencies," Thieliant said.
Steve Lucas, technical analyst at 3CANALYSIS, gives their perspectives on the USD/JPY currency pair. "We have persistently been bullish of USD/JPY, but in the very short-term we think there will be a pullback", he said. Steve explained their view by mentioning that since the pair posted the 12.5 year high in June, last week put in a bearish reversal candle, which is a negative signal. "We also think that the deception out there is that the Fed is going to be a little easier on raising interest rates and people are going to be a bit cautious and a bit sensible and take the money off the table", the analyst added.
USD/JPY hovers around 120.00
The USD/JPY currency pair remained relatively unchanged over the weekend, whereas attempts of breaking out of the triangle were made. Nonetheless, the Greenback only made a few steps closer to the triangle's apex, increasing the risk of piercing the trend-line. The Buck's attempts to rebound are likely to be limited by the weekly PP and 20-day SMA, whereas the triangle's up-trend is supporting the US Dollar from below at 119.70. The barrier seems to be holding for now, although the USD/JPY might push further down to 119.04.Daily chart
An attempt to break out of the triangle was made on Friday, but the 120.00 major level refused to let the USD/JPY pair go. The pattern's lower trend-line is still providing support, keeping the Greenback from edging lower, while the 200-hour SMA is determined to limit any recovery.
Hourly chart
Bulls preserve majority
OANDA and SAXO Bank also report minor preponderance of bullish market participants. In the first case the longs take up 60% of the market, up from 58% recorded on Friday. In the second case 63% of open positions are long, up from Friday's level of 56%.
Spreads (avg, pip) / Trading volume / Volatility
Exactly three quarters of traders see the Dollar higher than 120 yen on Dec 21
The average Dukascopy website visitor expects the US Dollar to cost almost 2 yen more in three months' time. Almost a fifth of survey participants (19%) estimates that the Greenback will be worth between 121.50 and 123 yen by the mid-December. At the same time, it is worth mentioning that 64% of the forecasts are above 121.50 and 75% of the given forecasts are set above the level of 120 yen.