- The number of buy commands declined from 61 to 59%
- 71% of traders hold long positions today
- Bollinger band and weekly R1 represent resistance around 120.65
- Support is around 120.14 (20-day SMA and weekly PP)
- The average three-month forecast stands at 120.90
- Upcoming events today: FOMC Members Lockhart, Evans and Brainard Speeches, Japanese Monetary Policy Meeting Minutes, Japanese Bank Lending
The US Dollar sustained losses against most major currencies, with exception versus the Yen and the Sterling. The Greenback lost 1.06% against the Aussie and 0.73% against Euro, followed by a 0.55%, 0.47% and 0.36% against the Loonie, the Swissie and the Kiwi, respectively. Gains, however, were recorded against the Sterling (0.21%) and the Yen (0.28%).
The number of people who filed for unemployment assistance in the US declined more-than-expected in the week ended October 3, extending a run of applications near decade lows that shows dismissals remain in check. According to the Labour Department report, unemployment claims fell by 13,000 to 263,000 in the reported week, beating market estimates of 274,000 applications. Even though claims data tends to be uneven from week to week, the number of applications has generally been declining since 2009. Nevertheless, other measures of the labour market in the US suggest some cooling in recent months, as the recent NFP figures showed that employers added 142,000 jobs in September and 136,000 in August.
At the same time, the Federal Reserve released the minutes of its most recent meeting in September, when the policymakers decided to hold off on raising the Fed Funds rate. Minutes revealed that the FOMC members are mostly worried about low inflation outlook, while they admit the US has approached the full employment situation. Despite that, the majority of them noted that they are still on track of hiking in 2015, but recent weak jobs' report may postpone the decision to the next year.
In response to the latest Bank of Japan meeting, Stuart Allsop, head of financial market strategy at BMI Research, said that no action from the central bank was expected and that they are likely to "refrain from doing any more stimulus this year". However, he noted that "the risks have increased".
Concerning the GDP growth, the analyst doubts that it will "get above 1% anytime in the foreseeable future". The reasons for this are manifold. First, there is "a huge headwind in terms of demographics". Additionally, there is a decline in growth of China coupled with global economic slowdown. However, the main negative factor provided by Allsop is a "very unstable production structure". He explains that the real interest rate is negative, which is "sending contradictory signals to the real economy", and this in turn leads to a low chance of "a productivity boom
As for the Japanese Yen, Allsop is bullish on the currency. In his opinion there are two main contributing factors. The first one is that "investors lose faith in the willingness of the BoJ to act. At the same Allsop adds that the Yen has proven recently its status as a global safe have, and this is beneficial for the value of the currency being that "global financial markets are looking quite shaky", which is negative for the risk sentiment. At the same time, the analyst mentioned that USD/JPY "may fall quite significantly in the coming months", and if this is the case, "this would raise the prospects of intervention from the BoJ."
Uneventful Monday
Both in Japan and the US there is a Bank Holiday today. However, a number of Fed officials are scheduled to speak today, who could boost or weaken the US currency with their statements. The BoJ is to have a Monetary Policy Meeting Minutes tomorrow early morning, which will drive the USD/JPY in the early hours.
Marcel Thieliant, economist from Capital Economics, forecasts USD/JPY to be at 130.00 by the end of the second quarter. The analyst commented that he expects the BoJ to step up the pace of easing at the end of this month. "This is obviously not what other economists expect, if that happens, we will probably see a strong drop in the Yen against the Dollar and against other major currencies," Thieliant said.
Steve Lucas, technical analyst at 3CANALYSIS, gives their perspectives on the USD/JPY currency pair. "We have persistently been bullish of USD/JPY, but in the very short-term we think there will be a pullback", he said. Steve explained their view by mentioning that since the pair posted the 12.5 year high in June, last week put in a bearish reversal candle, which is a negative signal. "We also think that the deception out there is that the Fed is going to be a little easier on raising interest rates and people are going to be a bit cautious and a bit sensible and take the money off the table", the analyst added.
USD/JPY in limbo amid bank holidays
The US currency behaved in accordance with expectations on Friday. The USD/JPY managed to rebound, but with the upside volatility was slowed down by the 20-day SMA, causing the pair to stabilise at 120.25. The Greenback opened just above 120.14, where the weekly pivot point coincides with the 20-day SMA, forming a rather strong support. Consequently, a decline is unlikely to occur, and with the absence of fundamental market movers, the Buck should edge higher against the Yen, but fail to reach the immediate resistance.Daily chart
The USD/JPY remains anchored around the 120.00 major level; therefore, the pair should decline towards it today as well. However, the 200-hour SMA lies in the way and could limit the losses. Nonetheless, in case of a breach, the up-trend is likely to provide support .
Hourly chart
Bulls preserve majority
OANDA and SAXO Bank also report minor preponderance of bullish market participants. In the first case the longs take up 55% of the market (60% previously). In the second case 61% of open positions are long, down from 64% on Friday.
Spreads (avg, pip) / Trading volume / Volatility
The average three-month forecast stands at 120.90
The 121.50-123.00 price interval remains the most popular choice, selected by slightly less than a fifth (20%) of all voters. The second most popular choices are the 123.00-124.50 and 124.50-126.00 price ranges, both voted for by 12% of the survey participants. Meanwhile, the mean forecast for January 12 is 120.90, while 39% of the surveyed still assume the Dollar could cost less than 120 yen in three months.