- The share of buy orders remains at 51%
- 51% of all open positions are short
- Immediate resistance lies at 117.90
- The closest support rests around 116.85
- 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.
US Manufacturing PMI and Construction Spending
On Tuesday the most important event is 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 sets eye on 118.00
Another rally on Monday caused the US Dollar to break out from the descending channel pattern, suggesting that more gains are likely to follow. Technical indicators are also in favour of the Buck outperforming the Japanese Yen again, but the weekly R1 now has the potential to limit the possible gains, as it located just under the 118.00 major level, bolstering that psychological resistance. A successful surge beyond 118.00 is to set the USD/JPY pair on a bullish path toward 118.70, where the ten-month high coincides with the weekly R2. However, the relatively recent sharp two-month rally brings doubts to another strong and stable bullish trend.Daily chart
The situation on the hourly chart today supports yesterday's outlook. The Buck is now likely to keep climbing up until its three-week high against the Japanese Yen is reached, namely the 118.67 level, also confirming the daily outlook.
Hourly chart
Bulls and bears are no longer in equilibrium, as 51% of all open positions are now short. The share of buy orders remains at 51%.
Right now 56% of OANDA clients are bears, compared to 57% on Monday. In the meantime, Saxo Bank traders reached a perfect equilibrium, being that 50% of their open positions are long and the remaining 50% 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.