- 51% of all orders are to sell the Greenback
- 68% of traders have a negative outlook towards the Buck
- The weekly PP and the monthly S2 around 117.50 is the nearest resistance
- Immediate support is around 116.05, represented by the Bollinger band, the weekly S1 and the 2015 low
- 56% of the survey participants expect the US Dollar to cost less than 120.00 yen in three months
- Upcoming events today: US NAHB Housing Market Index, US Building Permits, US CPI and Core CPI, US Housing Starts, US Crude Oil Inventories
Despite a weak reading of the US Core Retail Sales, the Greenback managed to post solid gains against some major peers on Friday and over the weekend. The US Dollar appreciated 1.77% against the Aussie, 1.22% versus the Loonie and 1.11% against the Sterling, while adding only 0.18% against the New Zealand currency. At the same time, the US currency dropped 0.91% versus the Yen, also losing 0.43% and 0.39% against the Euro and the Swissie, respectively.
American shoppers curbed their spending last month, fuelling concerns about the momentum in consumer spending heading into 2016. Sales at retailers declined 0.1% from the previous month to a seasonally adjusted $448.1 billion in December, according to the Commerce Department. Retail sales rose 0.4% in November, compared with an initially reported 0.2% gain. From a year earlier, sales grew just 2.1% in 2015, marking the slowest increase in the six-year expansion. Consumer spending is a key catalyst of the US economic growth, representing more than two-thirds of economic output. Household consumption has helped the world's number one economy grow in recent quarters despite a stronger Dollar and weak demand overseas, which have hit US exporters.
A separate report showed US producer prices declined in December, underscoring persistently low inflation. The producer price index, which measures the prices companies receive for goods and services, dropped 0.2% in December, the Labor Department reported. Excluding volatile food and energy categories, core prices inched up 0.1%. Overall producer prices were down 1.0% in December from a year earlier, the 11th consecutive year-over-year decline. Core prices increased 0.3% from a year earlier.
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 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."
Uneventful Monday
The Japanese Yen was weakened by BoJ Kuroda's remarks earlier today, with no further events scheduled to be released on Monday. Furthermore, there is a bank holiday in the US; therefore, attention should be paid to Tuesday's events, such as the NAHB Housing Market Index. The NAHB Housing Market Index is released by the National Association of Home Builders. It presents home sales and expected home buildings in the future indicating housing market trend in the United States. The growth rate of the housing market affects the USD volatility. Nevertheless, this particular release is unlikely to cause strong volatility in USD crosses.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 rises after Kuroda's statement
The US Dollar ended the previous week lower against the Japanese Yen, as it breached the up-trend and dropped to the lowest in five months. However, in spite of the US Bank holiday today, the USD/JPY is likely to edge higher, as the PBoC's policy movement and the BoJ Governor's remarks drove demand for the safe-haven Yen lower. The weekly pivot point and the monthly S2 around 117.50 are the levels to stop the pair's further appreciation; meanwhile, the weekly S1 and the Bollinger band should limit the dips in case a sell-off takes over the market.Daily chart
Upon reaching the 200-hour SMA, the USD/JPY bounced back significantly, dropping all the way down to 116.50. The support line is located too far, leaving enough space for the pair to drop lower if the 200-hour SMA is retested.
Hourly chart
Bears dominate the market
Other market participants, such as OANDA and SAXO Group, have a completely different sentiment, as the majority of their traders hold long positions. Among SAXO Bank, 62% of traders are long the US Dollar, whereas 65% of all positions at OANDA are also long (previously 63%).
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 123 yen
The largest half of the survey participants (56%) expect the US Dollar to cost less than 120.00 yen in three months. The most popular choice is the 114.00-115.50 price interval, selected by 35% of the voters; however, according to the votes collected between Dec 18 and Jan 18, the mean forecast for Apr 18 is 118.93. At the same time, 13% of the surveyed believe the Greenback could fall either in the 120.00-121.50 or 123.00-124.50 price intervals after a three month period.