- 61% of all pending orders are to acquire the US Dollar
- 52% of all open positions are long
- Immediate resistance lies around 116.15
- The closest support rests around 115.22
- Upcoming Events: US Average Hourly Earnings, US Non-Farm Payrolls, US Unemployment Rate, US Trade Balance, US Factory Orders
The number of Americans filing for first-time unemployment benefits declined to a 8-week low, official figures revealed on Thursday. However, last week's drop in claims was almost certainly exaggerated due to the Christmas holiday. According to the US Department of Labor, national jobless claims declined 28,000, to 235,000, during the week ending December 30, reaching their lowest level since the middle of November. Meanwhile, economists anticipated a slight deceleration to 260,000 during the reported period. It was the 96th week that initial jobless claims remained below the 300,000 level, the longest streak since 1973. Firms prevented firings as the supply of workers dropped pointing to a tight and healthy labor market. In the meantime, the four-week average of initial claims dropped 5,750 to 256,570 in the past week. Nevertheless, continuing jobless claims advanced 16,000 to 2.11 million in the week ended December 24, the highest rate since September.
The job market is considered to be near or at full employment, supported by the lower unemployment rate. Back in December, rising inflation and strong labor market trends allowed the Federal Reserve to raise its key interest rate to 0.50% from 0.75%.
US Employment data is due
Friday is relatively rich with US fundamentals, such as the Non-Farm Payrolls. They present the number of new jobs created during the previous month, in all non-agricultural business. The monthly changes in payrolls can be extremely volatile, due to its high relation with economic policy decisions made by the Central Bank. The number is also subject to strong reviews in the upcoming months, and those reviews also tend to trigger volatility in the forex board. Generally speaking, a high reading is seen as positive for the USD, while a low reading is seen as negative, although previous months reviews and the unemployment rate are as relevant as the headline figure, and therefore market's reaction depends on the market assets them all. Another important event is the US Unemployment Rate. It is a percentage that surges from dividing the number of unemployed workers by the total civilian labor force. It represents the percentage of people actively seeking employment and willing to work. Usually, as a higher rate is seen in recessionary economies, while on the contrary, a growing economy sees its unemployment rate decreasing. Therefore, a decrease of the figure is seen as positive for the USD, while an increase is seen as negative, although by itself, the number cannot determine the market's move as it depends on the headline reading, the Non-Farm Payrolls. One more event worth paying attention to is the US Trade Balance. It is a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the USD. If a steady demand in exchange for US exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the USD.USD/JPY trades in murky waters
The USD/JPY currency pair lost almost 200 pips on Tuesday, amid weak US fundamental data and the return of risk-aversion mood. Losses were only limited by the third support cluster, located just above the 115.00 major level. This demand area appears to have caused the Buck to rebound, but technical indicators are unable to confirm that the bullish momentum will last. Downside risks are present, in which case the exchange rate could drop below the 114.00, with the monthly S1 then being the only support to limit the losses. Meanwhile, a positive surprise in the data is unlikely to be sufficient to negate Thursday's dips.Daily chart
More bearish momentum followed on Thursday, with the exchange rate dropping to a fresh three-week low of 115.07. This sharp two-day decline appears to have run its course, with bulls taking over again. However, this might not necessarily be the case, as fundamental factors keep driving the markets.
Hourly chart
Today 52% of all open positions are long (previously 50%), whereas the share of buy orders remains unchanged at 61%.
Right now 54% of OANDA clients are bears, compared to 53% on Thursday. In the meantime, Saxo Bank broke out of the perfect equilibrium, being that 52% of their open positions are now long and the remaining 48% are short.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish on the Dollar
According to the poll that gathered forecasts between December 06 and January 06, traders expect the US Dollar to appreciate to 118.28 yen in three months' time, while the forecast for November 30 was only 103.30 yen. It is also worth noticing that 60% 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 either between 118.50 and 120.00, or between 120.00 and 121.50 or even between 123.00 and 124.50 yen in three months, with 13% of the survey participants each choosing these trading ranges. At the same time, the second most popular interval was the 111.00-112.50 one, with 12% of survey participants choosing it.