- The number of purchase orders gained one percentage point up to 57%
- The share of bulls remains unchanged at 59%
- 200-day SMA, monthly PP and weekly R1 represent resistance around 120.90
- Support is at 120.23 (20-day SMA)
- 69% of traders see the Dollar higher than 120 yen on Dec 24
- Upcoming events today: US Durable and Core Durable Goods Orders, US Jobless Claims, US New Home Sales, Fed Chair Yellen Speech, Japanese National Core CPI and Tokyo Core CPI
The US Dollar advanced against other major currencies, with exception against the Euro, against which it lost 0.59%. Nevertheless, the largest gain of 1.23% was registered versus the Aussie, followed by a 0.80% gain against the Sterling. The Yen provided the most difficulties, as the Buck managed to climb only 0.11% against it.
The US economy is enjoying "sustained, stable" growth, Treasury Secretary Jack Lew said, noting that workers need to see a more robust wage growth for the economy to continue to flourish. The world's number one economy posted gross domestic product of 3.7% in the second quarter, the strongest rate of growth since mid-2014. Job-creation has also been steady, pushing the nation's unemployment rate down to 5.1%, the lowest level in seven years.
US home prices rose more than expected in July amid ongoing improvement in the job market and as buyers competed for a tight property supply. Prices increased 0.6% on a seasonally adjusted basis from June, the Federal Housing Finance Agency said. This compared with the median forecast of a 0.4% rise and followed an unrevised 0.2% gain in June, which was the smallest gain in nine months. The HPI surged 5.8% in July when compared to the same period last year, which was faster than any 12-month period since April of last year, and up from a 5.5% year-over-year gain in June. The falling unemployment rate helped create a bigger pool of buyers, who found few homes on the market to choose from. Listings nationwide plunged 4.7% in July from a year earlier, the National Association of Realtors said. Price increases will encourage more homeowners to sell as they gain enough equity to trade up.
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 Core Durable Goods Orders, Fed's Yellen Speech and Japanese National Core CPI
With a rather large number of data releases from the US scheduled for Today, the most important one is probably the Core Durable Goods Orders. This is the cost of orders received by manufacturers for durable goods, which means goods planned to last for three or more years, with exception of the transport sector. The given orders usually involve large investments and, thus, are sensitive to the US economic situation. According to the forecast, the share of the orders is expected to decline significantly, but a better-than-anticipated figure could still boost the US Dollar against major peers. The second even to pay attention to is Yellen's Speech at 21:00 PM GMT. Information about the interest rate hike is expected to be revealed, with any delay for a hike after 2015 is likely to weaken the US currency. From the Japanese side, attention should be paid to the National Core CPI at 23:30 PM GMT, but will be unlikely to turn the tables after Yellen's Speech.
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 glued to 120.00
Although the US Dollar managed to rebound from the trend-line yesterday, gains were limited by the 20-day SMA, rather than the expected cluster near the 121.00 psychological level. The USD/JPY appears to be anchored around the major level of 120.00, as it keeps returning there for almost two weeks now after any shallow gains. However, instead of closing trade around this area, the Greenback risks breaking out of the triangle pattern in either direction, as it has nearly reached the pattern's apex.Daily chart
After another attempt to break out of the triangle pattern on the hourly chart, the USD/JPY still managed to return within its borders. However, the 200-hour SMA keeps providing resistance and pushing the pair back down, breaching the support trend-line for the fourth time. With the gap between the trend-line and the 200-hour SMA narrowing, risks of edging lower and breaking out of the pattern rise.
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 57% of the market, down from 58% recorded yesterday. In the second case 60% of open positions are long, up from Wednesday's level of 59%.
Spreads (avg, pip) / Trading volume / Volatility
69% of traders see the Dollar higher than 120 yen on Dec 24
The average Dukascopy website visitor expects the US Dollar to cost almost 2 yen more in three months' time. Slightly less than a fifth of survey participants (18%) 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 59% of the forecasts are above 121.50 and 69% of the given forecasts are set above the level of 120 yen.
The survey among Dukascopy Community members shows that traders are still undecided over the pair's future perspectives, votes are divided almost equally.
On the one side of the barricade we have khalidamassi, a member of the Dukascopy Community, who believes the USD/JPY moved in the last three weeks in range between 119 and 121. "This range may continue next week, any break of upper range may send the pair towards 122, but any clear break below 199 may send the pair sharply lower towards 116 level", he commented. On the other side, massimoscales suggests that the given pair is depending a lot on any release from China, which will be the main driver.