- 59% of all pending orders are to sell the Greenback
- Traders' sentiment remains bearish at 56%
- Immediate resistance lies around 116.50
- The closest support rests around 114.75
- Upcoming events: US Retail and Core Retail Sales, US PPI and Core PPI, US Capacity Utilization Rate, US Industrial Production, US Crude Oil Inventories, FOMC Statement, Federal Funds Rate decision
US import prices dropped markedly last month after two consecutive monthly gains, amid the lower cost of imported petroleum and stronger US Dollar. According to the US Department of Labor, import prices fell 0.3% in November, the biggest decline since February, following the previous month's downwardly revised gain of 0.4% and meeting analysts' expectations. On an annual basis, import prices decreased 0.1%, the smallest fall since July 2014, compared to October's drop of 0.3%. Last month's drop in import prices is unlikely to impact expectations that the Fed will raise rates at the end of its two-day policy meeting on Wednesday this week. The Greenback's surge and a plunge in oil prices between June 2014 and December 2015 dampened import price inflation. Imported petroleum prices declined 4.7% in November, the biggest drop since February, following the prior month's increase of 7.3% and offsetting a 10.6% rise in the price of imported natural gas. Excluding petroleum, import prices held steady last month, compared to October's 0.1% decline.
The report also showed that export prices fell 0.1% in the same month, after climbing 0.2% in October. Year-over-year, they dropped 0.3% in November, the smallest decrease since August 2014, after dipping 1.0% on the same basis in October.
Fed meeting eyed the most
Today most attention is on the US fundamentals. First of all, the US Retail Sales, they measure the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. Core Retail Sales, however, show all goods sold by retailers based on a sampling of retail stores of different types and sizes except the automobile sector. Another important event will be the Capacity Utilization Rate, which is the percentage of the US production capacity which is actually used over the short-time period. It is indicative of overall growth and demand in the US economy. A high capacity utilization stimulates inflationary pressures. Furthermore, the Industrial Production is due. It shows the volume of production of US industries, such as factories and manufacturing. Up-trend is regarded as inflationary, which may anticipate interest rates to rise. The most important even today, however, is the Federal Funds Rate decision. With a pre-set regularity, a nation's Central Bank has an economic policy meeting, in which board members took different measures, the most relevant one, being the interest rate that it will charge on loans and advances to commercial banks. In the US, the Board of Governors of the Federal Reserve meets at intervals of five to eight weeks, in which they announce their latest decisions. A rate hike tends to boost the local currency, as it is understood as a sign of a healthy inflation. A rate cut, on the other hand, is seen as a sign of economic and inflationary woes and, therefore, tends to weaken the local currency. If rates remain unchanged, attention turns to the tone of the FOMC statement, and whether the tone is hawkish or dovish over future developments of inflation.USD/JPY trades in murky waters
The USD/JPY currency pair remained relatively unchanged on Tuesday, managing to retain its position above the 115.00 mark. From the technical point of view, the Buck is likely to strengthen against the Japanese Yen today, rebounding from the four-week up-trend and putting the immediate resistance area circa 116.30 to the test. On the other hand, with fundamental events being the main drivers today, the outcome can be less pleasant for the American Dollar. There are risks involved, which can cause the given pair drop even below 113.00, completely ignoring the two closest demand areas.Daily chart
The USD/JPY pair appears to be anchored around the 115.00 major level, unable to post significant gains or to edge substantially lower. From below the 200-hour SMA and the 23.60% Fibo are providing support, while the upside is completely open. Fundamentals also suggest that further bullish momentum is likely to take over.
Hourly chart
Even though bulls gained some numbers over the day, traders' sentiment remains bearish, now at 56%. At the same time, the share of orders to sell the Greenback returned to its Monday's level of 59%.
Meanwhile, there has been an increase in the number of long positions at other brokers. Right now 57% of OANDA clients are bears, compared to 53% on Tuesday. In the meantime, Saxo Bank clients also remain slightly on the bearish side, being that the portion of shorts takes up 51% of the market.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish the Dollar
According to the poll that gathered forecasts between November 14 and December 14, traders expect the US Dollar to appreciate to 114.47 yen in three months' time, while the forecast for November 30 was only 103.30 yen. It is also worth noticing that 56% of all forecasts fall above 114 yen, which is close to the current spot price. The majority of people voted expect the US Dollar to cost somewhere between 117.00 and 118.50 yen in three months, with 14% of the survey participants choosing this trading range. Meanwhile, the second most popular intervals are the 111.00-112.50, 112.50-114.00, 115.50-117.00, 118.50-120.00 and 120.00-121.50 ones, with 10% of the votes each, also followed by the 114.00-115.50 interval, chosen by 9% of all the surveyed.