- The share of buy orders inched up from 62 to 64%
- Bearish market sentiment returned to last Friday's level of 71%
- The weekly PP and the 20-day SMA are the nearest support around 122.95
- Immediate resistance is around 123.65, represented by the Bollinger band and the weekly R1
- 56% of the survey participants expect the US Dollar to cost more than 124.50 yen in three months
- Upcoming events today: US JOLTS Job Openings, Japanese Core Machinery Orders
The US Dollar was one of the best-performing currencies on Monday, having advanced against most major peers. The largest gains were registered against the commodity currencies, amid a fall in oil prices. The Greenback added 1.56% against the Kiwi, 1.03% versus the Loonie and 0.96% against the Aussie, whereas the smallest rally was detected against the Japanese Yen, only 0.21%.
US non-farm payroll growth continued to gather speed from October said, the Bureau of Labor Statistics, as the world's number one economy created 211,000 jobs last month, a solid pace that would help push the economy closer to full employment. Economists had expected the 200,000 increase. The jobless rate remained steady at a seven-year low of 5.0%. The average increase in payrolls over the past three months is now 218,000, the strongest since July. In addition to that, average hourly earnings climbed 0.2% last month, in line with expectations, slowing after a big increase a month earlier. As a result, the 12-month change slid to 2.3%, closer to the trend in recent years.
The jobs report is widely considered as the most significant monthly indicator of economic health, and earlier this week Fed Chair Janet Yellen said she still wanted to see more data before making a decision about a potential rate hike at the FOMC's meeting in less than two weeks. If the Fed raises interest rates for the first time in almost a decade, it would end an unprecedented period of easy borrowing that helped boost investment and spending. Yet, Yellen reiterated that interest-rate hikes will be slow and gradual in the months ahead due to sluggish growth overseas as well as divergent monetary policies between the US and other nations.
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".
Raig Erlam, senior currency analyst with OANDA, considers that more stimulus from the BOJ is "inevitable", but it is the timing that is yet uncertain. Erlam expects the central bank to hold off this week, but he thinks that "at some point towards the end of the year we may start to see the message being conveyed through to the market that stimulus is coming".
Concerning the GDP growth, the BMI Research 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 JOLTS Job Openings
Tuesday is rather empty in terms of fundamental data releases, with the only relevant event being the US JOLTS Job Openings. It shows the number of job openings during the reported month, with exception of the farming industry. Despite its late release, it could still have a significant impact on the market, as the given report is a leading indicator of overall employment. From the Japanese side attention should be paid to the Core Machinery Orders, which are to set the mood for Wednesday's early trade. According to the forecast, these orders are expected to drop substantially, thus, weakening the Japanese currency.
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Raig Erlam, senior currency analyst at OANDA, reckons that this week's FOMC statement will be "the Fed's last opportunity to convince the market that rates are still on course to be raise this year". In case they exclude this message from the statement, then "they are not going to raise rates this year and we are probably looking more towards the middle of the next year".
USD/JPY stuck between 123.00 and Nov high
Yesterday the USD/JPY currency pair edged closer to the Nov high, but failed to touch the immediate resistance cluster. Today the Yen got the upper hand, as it was boosted by a stronger-than-expected Japanese GDP reading. The cluster around the 123.00 major level, namely the weekly PP and the 20-day SMA, should provide sufficient support, but the bullish momentum could still be regained, with the Greenback touching the upper Bollinger band at 123.55. Meanwhile, technical studies retain their mixed signals, unable to confirm either scenario.Daily chart
On the hourly chart the USD/JPY was seen reaching a high of 123.48 yesterday, with the bullish momentum fading afterwards. The pair extended its decline today, now facing the 200-hour SMA just under the 123.00 major level. This support area is expected to hold the pair from falling deeper, as a number of supports are also present in this area on the daily chart.
Hourly chart
SWFX sentiment strongly bearish
OANDA and SAXO Bank are similar in the share of their long and short positions. The share of bulls in the market of the Canadian-based broker worsened today, but remains bullish at 52% (down from 56%), while the long and short positions at SAXO Bank now take up 51% and 49% of the market, respectively.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the rate to stay above 123 yen
The majority of forecasts appear to be centered around the 124.50 price level. However, 56% of traders believe the US Dollar will cost even more after a three month period. The most popular price interval was 124.50-126.00, selected by slightly less than a fifth (19%) of the voters, whereas the second most popular choice is divided the 126.00-127.50 interval, chosen by 14% of the surveyed. The mean forecast for Mar 8 is 123.93.