- The portion of orders to sell the US Dollar increased from 51 to 57%
- 57% of all open positions are long
- The nearest resistance is located around 104.50
- The closest support rests at 103.50
- Upcoming events: US Initial Jobless Claims, US Import Prices, US Crude Oil Inventories, Japanese PPI
On Wednesday the Fed released the minutes of its September meeting, once again refraining from raising interest rates. Several FOMC members expressed desire to raise rates, while others stated that a rate hike would be required 'relatively soon'. It was the first time in five years when more than two officials voted for an immediate rate hike. Some Fed policy makers still have concerns over the strength of the labor market and inflation, thus, more evidence of US economic growth is required. Inflation has been below the Fed's 2% target, namely at 1.7%, but it was still argued that the levels are quite close to expectations and there are few signs of inflationary pressures.
Some argue that the Fed was somewhat hawkish, but these minutes had little impact on the markets, as they brought more uncertainty, not necessarily suggesting a rate hike will occur in December, despite Fed Chair Jannet Yellen and several other officials stating that they would raise rates by year's end if inflation and employment figures keep improving. Although there are two more Fed meetings scheduled in 2016, a move in November has been basically ruled out due to US presidential elections. According to CME Group's data, a December rate hike is currently seen with a probability of slightly more than 60%.
US Initial Jobless Claims and Import Price Index
On Thursday the data from the US side is due, such as the Initial Jobless Claims and the Import Prices. The Initial Jobless Claims are released by the US Department of Labor and are a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labor market. A larger than expected number indicates weakness in this market, which influences the strength and direction of the US economy. The Import Price Index, however, informs the changes in the price of imported products into the US. The higher the cost of imported goods, the stronger the effect they will have on inflation, redunding in a higher probability of a rate rise. Generally, a high reading should be taken as positive for the USD, while a low reading is seen as negative. From the Japanese side the PPI will be released closer to midnight, which is a measure of prices for goods purchased by domestic corporates in Japan. It is correlated with the CPI and is a way to measure changes in manufacturing cost and inflation in Japan. A high reading is seen as anticipatory of a rate hike and is positive for the JPY.USD/JPY struggles to remain above 104.00
The American Dollar appreciated against the Japanese Yen on Wednesday, beating expectations and easily climbing over the 104.00 level. The second resistance area managed to contain yesterday's volatility, which also caused the USD/JPY pair to make a U-turn. Meanwhile, the monthly R1 and the 100-day SMA form immediate support around 103.50, which should prevent the pair from edging lower if bears remain dominant. Technical indicators are unable to confirm this outlook, as they are giving bullish signals in the daily timeframe, suggesting that a close above 104.00 is still possible.Daily chart
Even though the US Dollar outperformed the Japanese Yen on Wednesday, a relatively sharp decline occurred earlier today, causing the pair to retreat towards the three-week up-trend. This bullish trend-line, however, is expected to hold and keep providing the Greenback with sufficient support to further rise against the Yen.
Hourly chart
For the second day in a row 57% of all open positions are long, whereas the portion of orders to sell the US Dollar increased from 51 to 57%.
Meanwhile, there has been an increase in the number of long positions at other brokers. Right now 59% of OANDA clients are bulls, compared to 53% on Wednesday. Saxo Bank clients, however, are slightly less bullish than on Wednesday, being that the portion of longs now takes up 56% of the market.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish the Dollar
According to the poll that gathered forecasts between September 13 and October 13, traders expect the US Dollar to appreciate to 104.84 yen in three months' time, while the forecast for November 30 was only 103.30 yen. It is also worth noticing that 80% of all forecasts fall above 102 yen, which is close to the current spot price. By far the most popular interval is 108.00-109.50, chosen by 19% of all the surveyed, compared to popularity of the 105.00-106.50, 106.50-108.00 and 109.50-111.00 intervals.