- 51% of all pending orders are to purchase the Buck
- 50% of all open positions are long/short
- Immediate resistance lies circa 117.16
- The closest support rests at 116.97
- Upcoming Events: US Manufacturing PMI, US Construction Spending
Business activity in the Chicago region dropped unexpectedly in December, official figures showed on Friday. The Institute for Supply Management said its Chicago Purchasing Managers' Index fell to 54.6 points in the reported month after rising to 57.6 in November, while market analysts anticipated a slight deceleration to 56.5. However, any reading above the 50 point-level indicates expansion in business activity. Three of the five barometer components decreased between November and December, whereas employment held steady and supplier deliveries grew modestly. The worse than expected result was mainly driven by a slump in new orders, which fell 6.7 points to 56.5. Despite December's decrease, the Q4 reading reached its two-year high. About 50% of respondents said they expect the new administration to bring positive changes and benefit their businesses, whereas 40% noted that they expect no changes and 9% of respondents project a decline in business activity.
As a result, the EUR/USD pair jumped from 1.0529 ahead of the release to 1.0544, while the GBP/USD advanced from 1.2357 to 1.2377.
Uneventful Monday
Since most of major banks have a holiday on Monday, all focus turns to fundamental events on Tuesday, such as the US Manufacturing PMI. The US Manufacturing PMI is released by both the Institute for Supply management and the Markit Economics. It captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the Manufacturing PMI is an important indicator of business conditions and the overall economic condition in the US. Another relevant event will be the US Construction Spending. It is an indicator that measures the total amount of spending in the US on all types of construction. The residential construction component is useful for predicting future national new home sales and mortgage origination volume.USD/JPY on the edge of breaking the channel pattern
The USD/JPY currency pair managed to post some gains last Friday, retaking the 117.00 major and reconfirming the channel's borders. Today the pair opened on top of the same psychological mark, now facing the channel's upper boundary. Consequently, the US Dollar should suffer a small loss in order to provide the channel with an additional confirmation, but the weekly PP, located at 116.97, could provide sufficient support to cause an upside breakout. Furthermore, technical studies also suggest the Greenback is to end the day in the green zone, implying that two weeks was enough for the descending channel pattern to last.Daily chart
Despite a break of the up-trend on the hourly chart, the USD/JPY managed to find support on the daily one, with the exchange rate once again regaining the bullish momentum. As a result, with the breach of the 200-hour SMA, the Buck now has the potential to reach its three-week high of 118.69.
Hourly chart
The bulls and the bear ratio is still equal to one today, while the share of buy orders takes up 51% of the market, unchanged since Friday.
Right now 57% of OANDA clients are bears, compared to 56% on Friday. In the meantime, Saxo Bank traders turned slightly bullish, being that 51% of their open positions are long and the remaining 49% are short.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish on the Dollar
According to the poll that gathered forecasts between November 30 and December 30, traders expect the US Dollar to appreciate to 118.14 yen in three months' time, while the forecast for November 30 was only 103.30 yen. It is also worth noticing that 58% of all forecasts fall above 117 yen, which is close to the current spot price. The majority of people voted expect the US Dollar to cost somewhere between 120.00 and 121.50 yen in three months, with 17% of the survey participants choosing this trading range. At the same time, the second most popular interval was the 118.50-120.00 one, with 12% of survey participants choosing it.