- The share of buy orders went up from 59 to 63%
- The bulls take up 62% of the SWFX market
- 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: BoJ Monetary Policy Statement, Japan's All Industry Activity, FOMC Powell Speech, US Housing Market Index
Japan's industrial output fell less than initially estimated in November, according to the final data from the Ministry of Economy, Trade and Industry. Industrial production in the world's third biggest economy declined a seasonally adjusted 0.5% in November from the preceding month, revised from the 0.6% drop and following the 0.4% growth in October. On an annual basis, industrial output declined 3.7% in the reported month after the 0.8% fall in October. Shipments were down by 1.4% in November, in line with preliminary reading, while inventories rose 1.1% instead of a flash estimate of 1%. Similarly, inventory ratio gained 4.2% compared with 4% estimated initially.
Meanwhile, consumer confidence in the country improved for the first time in five months in December, according to the Cabinet Office, as declines in global oil prices translated into domestic energy prices drops in Japan. The Consumer Confidence Index climbed to 38.8 in December up from 37.7 in the preceding month, whereas market participants had predicted the index to rise to 38.5. The sub-index of employment levels rose by 1.3 points to 44.1 in December, while the overall livelihood index and the indicator for income growth gained both 1.1 points to 36.0 and 38.7, respectively. The willingness to buy durable goods sub-index inched higher by 0.9 points to 36.3.
BoJ Monetary Policy Statement early Wednesday
While Tuesday is unlikely to bring any significant news, already at the very beginning of Jan 21 the Bank of Japan is going to release a Monetary Policy Statement. Though the regulator is not expected to announce any major changes in its current policy, it is rumoured to discuss possibilities to stimulate lending in the economy.
USD/JPY attacks resistance at 118
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
Although the resistance at 118 was seen as capable of preventing a rally, USD/JPY is currently eroding the resistance created by the 55-day SMA, 23.6% Fibo and weekly PP. Should this supply area be violated, the monthly pivot point at 119 will be come the next target, followed by the late December highs at 121. Conversely, if the bears withstand the buying pressure, the US Dollar is to return to 116, namely in the vicinity of the monthly S1 and 38.2% Fibo.
Hourly chart
Market becomes more optimistic with respect to USD/JPY
The bulls continue to increase their share. At the moment they take up 62% of the SWFX market (61% yesterday and 57% five days ago). OANDA also reports that bulls are returning to the market, as their share grew back to 63%. Meanwhile, the sentiment towards USD/JPY among the SAXO Bank clients remains neutral - 51% of open positions are long and 49% are short.
Another piece of evidence in favour of the growing demand for the US Dollar is that the share of buy orders went up as well, but from 59 to 63% within the last 24 hours.