- Orders to buy the Buck are in a majority with 58% of the market
- Distribution between the long and short positions in the SWFX marketplace is perfectly unchanged, 58 and 42%, respectively
- 17% of traders see USD/JPY above 124.5 by mid-May
- FXPro and Caxton FX: USD/JPY to aim for 135
- Upcoming events: US Banking Holiday; on Tuesday: Empire State Manufacturing Index, NAHB Housing Market Index, Mortgage Delinquencies
US import prices posted the biggest decline in six years in January, adding to signs that domestic inflation could remain subdued for a while. The Labor Department reported that import prices plunged 2.8% last month, the largest drop since December 2008, after falling by a revised 1.9% in the preceding month. It was the seventh consecutive month of declines in import prices. In the 12 months through January prices fell 8.0%, the largest drop since September 2009. Import prices on goods aside from oil also declined, but at a much slower pace, partly reflecting a stronger Greenback and weak overseas growth. Excluding petroleum, import prices inched lower 0.7% from the prior month, the largest fall since March 2009, and were down 1.2% from the previous year. American exporters have been also facing new challenges amid weak growth overseas and a strengthening Dollar, which makes US-made products less competitive on the global market. Export prices fell 2% from a month earlier, the biggest fall since October 2011.
US consumer confidence unexpectedly declined in February from the highest level in 11 years despite strong job gains over the last months, signs of wage growth as well as lower gasoline prices. Consumer sentiment index dropped to 93.6 down from 98.1 in January, pointing to slower spending and uptick in gasoline prices in the beginning of the year.
Given a string of disappointing news lately, Michael Hewson, a senior analyst at CMC Markets, is rather downbeat regarding the US economy, saying it is "nowhere near as robust as people think it is", adding that a view of a rate hike this summer is "overly optimistic".US banking holiday
Today we are left without the updates on the US economy, as the banks will be closed in observance of Presidents' Day. Tomorrow the markets will be expecting several medium-importance releases, including the news on the state of the manufacturing sector and housing market.
USD/JPY dips through 119
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
Demand at 119 turned out to be insufficient to prevent further depreciation of the US Dollar, and the currency is now headed toward 118. A sell-off beyond this level is unlikely, being that it is reinforced by the weekly S1, monthly PP and 23.6% Fibo. Still, should the bears break this support, USD/JPY will be expected to descend to 116.00/115.50 (weekly S3, monthly S1, 100-day SMA and 38.2% Fibo).
Hourly chart
Bulls take up most of the market
The distribution between the long and short positions in the SWFX marketplace is perfectly unchanged, 58 and 42%, respectively. At the same time, there are relatively less orders to buy the Buck, though they are nevertheless in a majority with 58% of the market.
OANDA traders are even more optimistic with respect to the Greenback, since 63% of open positions are long (61% on Friday). In the meantime, the attitude of the SAXO Bank traders stays neutral, being that 53% of open positions are short and the remaining 47% are long.