- Percentage of buy orders declined from 73% to 68%
- 59% of open positions are long
- Fingraphs.com: USD/JPY to trade in the 123-125 region in the next few months
- FXPro and Caxton FX: USD/JPY to aim for 135
- Upcoming events: US ADP Non-Farm Employment Change, ISM Non-Manufacturing PMI
Orders for US-manufactured goods declined for a fifth consecutive month in December, marking the longest streak since the Great Recession ended. According to the Commerce Department, new orders for factory goods dropped 3.4%, following the 1.7% decline in November and beating economists' expectations for a 2.2% decrease. However, orders for non-defence capital goods excluding aircraft, considered as a gauge of business confidence and spending plans, fell 0.1% compared with the 0.6% drop in the previous month, adding to signs of a rebound in the coming months. Business spending on equipment in the final quarter of the year was the weakest since mid-2009, holding back the US economy to a 2.6% annual growth rate. Economists estimate that the slowdown will be temporary and the growth will accelerate this year as consumer spending remains strong.
Manufacturing is being undermined by faltering demand in Europe and Asia, as well as a strong US Dollar and plunging crude oil prices, which have forced some companies in the energy sector to either postpone or cut back on capital expenditure projects. However, it is expected that solid domestic consumer spending will be enough to compensate a drag form the global economy. The US economy is seen growing at a rate above 3% for all of 2015, which would be the best annual growth in a decade.
Hiring to weaken; services sector to expand
The Institute for Supply Management is estimated to show further improvement in the economy, being that the Non-Manufacturing PMI is expected to go up from 56.2 to 56.6. Meanwhile, the pace of new workplaces creation, as reported by the ADP, may slow down, from 241 to 224K.
USD/JPY retains negative short-term bias
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 prompt up inflation.
Daily chart
USD/JPY recovered from the weekly S1 at 116.94, but the bullish momentum appears to be insufficient to push the price through the resistance at 118. There the two-week down-trend line coincides with the monthly pivot point and is thus unlikely to let the rally to extend further. Accordingly, the currency pair is expected to slide down through the nearest supports and reach the demand at 115.54/32, namely the 38.2% Fibo and monthly S1.
Hourly chart
SWFX sentiment stays bullish
Although not as strong as five days ago, but the SWFX sentiment towards the US Dollar remains bullish, as 59% of open positions are long. At the same time, the percentage of buy orders declined, from 73% observed 24 hours ago to 68%.
The distribution between the bulls and bears at OANDA is perfectly unchanged; 60% of traders expect to profit from appreciation of the US Dollar. At the same time, the percentage of long positions at SAXO Bank plunged, namely from 73 to 49%.
Spreads (avg, pip) / Trading volume / Volatility
59% of traders expect the US Dollar to outperform the Yen
The short-run sentiment towards the pair is unchanged - a noticeable majority (62.5%) sees USD/JPY closing this week in red. The most popular expected destination of the rate is 117.4/116.4, chosen by a little more than 23% of all respondents.