- Percentage of commands to sell the buck surged from 53 up to 66%
- The bulls retain a majority in the SWFX market - 60% of open positions are long
- Fingraphs.com: USD/JPY to trade in the 1.23-1.25 region in the next few months
- FXPro and Caxton FX: USD/JPY to aim for 135
- Upcoming events: Upcoming events: US CPI, Industrial Production, Consumer Sentiment
US unemployment claims unexpectedly surged to the highest level in four months last week a slight setback for the labour market that has marked 2014 as the best year of job gains in more than a decade. The number of initial jobless claims jumped 19,000 to a seasonally adjusted 316,000 in the week ended January 10, the Labor Department reported. Economists had called for 290,000. The four-week moving average for initial claims, considered to be a better gauge of trends in the labour market as it strips out weekly volatility, climbed 6,750 to 298,000. It has, however, remained below 300,000, which is associated with a strengthening labour market, for 18 weeks. Almost 3 million new jobs were added last year, the strongest annual gain since 1999.
Another report showed that price pressures in the world's biggest economy remained weak. The wholesale price index dropped 0.3% in December, the biggest decline in three years, after falling 0.2% in the preceding month, according to Labor Department data. Year-over-year, the producer price index climbed at an annualized rate of 1.1% in December, above expectations for a 1.0% rise and following a gain of 1.4% in the previous month. However, core producer prices increased at an annualized rate of 2.1% in December, compared to forecasts for a 1.9% increase and up from 1.8% in the preceding month.
US data to dominate from 13:30 GMT
The main event of Friday is going to be the inflation figure in the United States, which is estimated to remain at -0.3%. At the same time, the consensus for the sentiment among the consumers is a positive change from the previous reading of 93.6 to 94.2.
USD/JPY tests neck-line
Simon Smith, Chief Economist at FXPro, is expecting the Yen to weaken next year. He does not rule out a possibility of USD/JPY surging up to 135, reasoning that the Japanese government is going to push ahead with the policy measures to prop up economic growth.
Nicholas Ebisch from Caxton FX shares a similar view, anticipating moderate appreciation of the US Dollar against the Yen over the next 12 months. He forecasts the currency pair to go up to 122 in a month, subsequently reaching a target of 125 by April. According to the analyst, by the end of 2015 the rate may well achieve the level of 135, on the condition the US macroeconomic indicators do not fall behind the expectations and the Japanese officials introduce more easing measures to promt up inflation.
Daily chart
USD/JPY has reached an important level that, if violated, can lead to a sharp move south. The support at 116 is a neck-line of a double top pattern, and its breach may trigger selling that is unlikely to halt until the price drops down to 113, namely the 50% retracement of the latest major up-move from 105 and the 100-day SMA. However, the technical indicators do no favour such a scenario, they are currently either bullish (weekly) or mixed (daily and monthly).
Hourly chart
Sentiment remains bullish
The bulls retain a majority in the SWFX market - 60% of open positions are long. At the same time, the percentage of commands 100 pips from the spot price to sell the buck surged from 53 up to 66%, suggesting we are approaching a significant demand zone.
The distribution between the bulls and bears at OANDA is also noticeably skewed in favour of the former, as they constitute 63% of all traders. SAXO Bank traders, on the other hand, became significantly less optimistic regarding the bullish prospects of USD/JPY, as the share of longs declined to 53%.
Spreads (avg, pip) / Trading volume / Volatility
Overwhelming majority sees USD/JPY above 117
At the same time, most (57%) of the FX Community members expect the greenback to outperform the Yen during the week. For instance, il_Ciano believes the divergence between the US and Japan is going to play the main role in pushing the pair upwards. On the other hand, Jignesh is bearish on USD/JPY, seeing downside risks emanating from poor performance of the equities.