- Share of buy orders plummeted from 68 to 53%
- Percentage of longs has gone up from 59 to 62%
- 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 Trade Balance, Unemployment Claims
US private companies created more than 200,000 jobs in January for a fifth straight month, adding to signs of sustainable labour market growth. According to ADP report, private sector employment rose by 213,000 jobs in January, after the 253,000 increase a month earlier and shy of forecasts for a 220,000 new positions. The gauge is the forerunner to non-farm payroll data on Friday that is expected to show 230,000 new jobs were created last month, while the unemployment rate is seen at 5.6%, still slightly above the range considered full employment by the Fed policy makers is 5.2% to 5.5%.
Activity growth in the US services sector recovered in January, though companies reported the weakest level of new business growth in more than five years. According to the data compiler Markit, the final reading of the services PMI climbed to 54.2 in January, up from both the preliminary estimate of 54.0, as well as the December figure of 53.3, the lowest level in ten months. The rebound in the services sector activity was also reflected in the ISM report, which showed US service companies kicked off the new year on a firmer footing. The ISM non-manufacturing PMI rose to 56.7 in January compared with an upwardly revised 56.5 in December. The index has been hovering above the crucial 50-point mark, which separates growth from contraction, since November 2009.
Japan remains quiet; important US data at 13:30 GMT
As there are still no important economic events in Japan, the main risks for USD/JPY are represented by the United States data. According to the market estimates the trade deficit will contract, while the forecast for the number of people requesting jobless benefits (287K) is higher than the last week's value of 265K.
USD/JPY returns to 117
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
For now the trading this month is limited to the 117-118 price range, as neither bulls nor bears appear to have enough power to start a new trend. If the price dips beneath the weekly S1 at 117, USD/JPY will most likely keep sinking until it reaches the 38.2% Fibo at 115.50. On the other hand, a rally above the falling resistance trend-line at 118.10 may attract more bulls and thus help the US Dollar to re-test the Jan 20 high at 118.80.
Hourly chart
SWFX sentiment improves
Though long positions have been lately losing popularity, during the last 24 hours their percentage has gone up from 59 to 62%. However, there are no more orders to support demand for the Buck, as their share plummeted from 68 to 53%.
A similar distribution between the longs and shorts is at OANDA, where 63% of traders expect to profit from US Dollar's appreciation and 37% expect to profit from its underperformance. At the same time, SAXO Bank clients are considerably less confident in the bullish outlook for the Greenback, as only 52% of open positions are long.
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.
Community member khalidamassi believes that "the release of US employment data may strongly help the USD/JPY pair after weeks of narrow range". At the same time, Likerty considers that bulls are weak right now, and "if they go for the highs again, rejections could be placed at 118.30 level or lower".