- Percentage of orders to buy the Buck soared from 53 to 68%
- Distribution between the longs (62%) and shorts (38%) is unchanged
- 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 Non-Farm Employment Change, Unemployment Rate, Average Hourly Earnings
The US trade deficit unexpectedly widened in December to the highest level since 2012 as imports increased despite lower energy costs, which will negatively affect the fourth-quarter growth revision later this month. According to the Commerce Department, the trade gap increased 17.1% to $46.6 billion, the largest since November 2012 and the biggest percentage increase since July 2009. November's shortfall on the trade balance was revised to $39.8 billion from a previously reported $39.0 billion. In December, imports rose 2.2% to $241.4 billion, with imports of non-petroleum products surging to a record high, a sign of strengthening in the domestic economy. Exports slipped 0.8% to $194.9 billion in December, being undermined by cooling growth in Asia and Europe, a strengthening Dollar. The government reported last week that the nation's economy rose at a 2.6% annual rate, with trade estimated to have deducted 1.02 percentage point from growth.
US trade balance data was not the only negative news on Thursday. Initial jobless claims rose last week to a seasonally adjusted 278,000, following revised up 267,000 claims in the prior week. Nevertheless, the gauge remains at levels consistent with solid job growth. The four-week moving average for claims, which evens out week-to-week volatility, dropped by 6,500 to 292,750 last week. The number of people filing continuing claims for benefits rose to 2.4 million for the week ended January 24.
US labour market data to stir the market
The NFP report at 13:30 GMT is the main risk event today for all the major currency pairs, including USD/JPY. According to the consensus forecast, the Bureau of Labor Statistics is to show slowing monthly creation of workplaces from 252 to 236K. The volatility will also be elevated because of the US Unemployment Rate and Average Hourly Earnings.
USD/JPY keeps finding support at 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 the time being the weekly S1 at 117 acts as a reliable support, even though the downside risks prevail in the near term. USD/JPY is still considered vulnerable and may decline down to 116. However, a sell-off beyond that point is unlikely unless the pair fails to breach the down-trend until the end of February. USD/JPY will then complete a descending triangle, a pattern that is indicative of weakening demand and an increased possibility of a decline.
Hourly chart
Sentiment stable; demand strengthens
The distribution between the longs (62%) and shorts (38%) is completely unchanged compared to the yesterday's readings. On the other hand, the percentage of orders to buy the Buck soared from 53 to 68%, suggesting that demand is exceeding supply, which may put upward pressure on the price of the Dollar.
OANDA traders are also bullish towards USD/JPY, being that 61% of them hold long positions. Meanwhile, SAXO Bank clients are considerably less optimistic regarding the ability of the US Dollar to gain in value. Only 51% of them expect the currency pair to move higher.
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".