- Percentage of buy orders placed 100 pips from the spot is considerably lower than yesterday, 66% versus 86%
- 62% of traders are long the Dollar
- FXPro and Caxton FX: USD/JPY to aim for 135
- Upcoming events: US JOLTS Job Openings, FOMC Member Lacker Speech
Japan recorded its sixth consecutive monthly surplus in the broadest measure of trade in December. Nevertheless, the surplus shrank for a fourth straight year to the smallest on record in 2014. The gap in trade rose to an adjusted 976.6 billion yen in December from 914.5 billion yen in the preceding month, helped by income from overseas investments and a narrowing trade gap due to a weak Japanese Yen and falling oil prices, according to the Ministry of Finance. Analysts, however, had estimated a surplus of 940.8 billion yen in December. The surplus in the current account stood at 187.2 billion yen in December before seasonal adjustment. Exports jumped 19% from a year earlier, while imports soared 6.7%, leaving a trade deficit of 395.6 billion yen in December.
The local currency has lost 29% versus the US Dollar since Prime Minister Shinzo Abe came to power in December 2012 with a pledge to restore the world's third-biggest economy implementing reflationary Abenomics policies. Yet, Japan's consumers feel pessimistic about economic conditions in the country. The consumer confidence index compiled by the Cabinet Office ticked up to 39.1 in January from 38.8 in the preceding month. Readings below 50 indicate that households believe that economic conditions are deteriorating. The biggest drag on consumer confidence came from the sales tax hike in April 2014, when the levy rose from 5% to 8%.
No major drivers
Volatility of USD/JPY has a good chance of staying low. There will be no Japanese data for two days, and there are no high-impact releases scheduled in the United States.
USD/JPY gets ready for another rally
Simon Smith, Chief Economist at FXPro, is expecting the Yen to weaken throughout 2015. 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 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.
Yves Perreard, CEO of Perreard Partners Investment, appears to be less confident in bullishness of USD/JPY in the short term. He expects the Japanese Yen to strengthen in the coming months pulling the pair to 115 by the end of March because of "repatriation of the pension funds" and "lack of foreign investment". However, in the longer run Perreard is also bullish the US Dollar, reckoning the rate will then recover to 120 by the mid-year.
Daily chart
USD/JPY is still in a correction phase after a sharp rally on Friday. The immediate support is at 118.39, followed by a dense demand area at 118, where the monthly PP coincides with the 23.6% Fibo. The positive bias is reinforced by the daily and weekly studies, as there are more indicators pointing up than down, though the monthly signals are still mixed. Nevertheless, the Buck should be able to reach the monthly R1 at 120 in the next few days.
Hourly chart
SWFX sentiment distinctly bullish
The current bullish sentiment is marginally stronger than 24 hours ago, as 62% of traders are long the Dollar. At the same time, the percentage of buy orders placed 100 pips from the spot is considerably lower than yesterday, 66% versus 86%.
The sentiment at OANDA is net bullish as well. However, it is slightly weaker, being that 59% of positions open at the broker are long. A different story is observed at SAXO Bank, where the distribution between the bulls (44%) and bears (56%) is noticeably skewed toward the latter.