- The share of buy orders slid from 56 to 55%
- Slightly less than three quarters (73%) of traders are now short the USD
- The 100-day SMA implies a ceiling around 121.75
- Immediate support is at 121.39, represented by the weekly R1
- Almost three quarters of the surveyed expect the rate to stay above 120 yen in three months
- Upcoming events today: US Average Hourly Earnings, US Non-Farm Payrolls, US Unemployment Rate, US Consumer Credit, FOMC Member Brainard Speech,
The US currency struggled to post significant gains against most major peers, with exception versus the Sterling, which suffered a 1.15% from the BoE Chair's dovish statement. Other small gains were registered versus the Swissie, the Loonie and the Yen, while the Buck also declined 0.28% against the Kiwi and 0.16% against the Euro. Furthermore, the AUD/USD remained relatively unchanged, edging down only 0.06%.
US jobless claims unexpectedly rose last week, recording their largest increase in eight months, but remained at levels associated with a healthy labour market. Initial claims for state unemployment benefits surged 16,000 to a seasonally adjusted 276,000 for the week ended Oct. 31, the Labor Department said. It was the largest weekly gain since late February. Yet, it was the 35th consecutive week that claims were below the 300,000 threshold, which is normally consistent with a strong jobs market. Claims had hovered near 42-year lows for much of October. The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, climbed 3,500 to 262,750 last week.
Meanwhile, the productivity of workers on non-farm payrolls rose at an annual rate of 1.6% in the third quarter, whereas the markets had expected a 0.4% drop. This was the second consecutive increase, as worker efficiency had jumped 3.5% in the previous three-month period. Nevertheless, productivity growth has been subdued in recent years, which is why many economists believe a shortage of workers will soon put upward pressure on inflation.
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".
Raig Erlam, senior currency analyst with OANDA, considers that more stimulus from the BOJ is "inevitable", but it is the timing that is yet uncertain. Erlam expects the central bank to hold off this week, but he thinks that "at some point towards the end of the year we may start to see the message being conveyed through to the market that stimulus is coming".
Concerning the GDP growth, the BMI Research 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."
US Non-Farm Employment Change
The BoJ governor's speech early today weighed on the Japanese Yen, with further focus set on the US Labor Market data, namely the Non-Farm Employment Change and the Average Hourly Earnings. The Non-Farm Payrolls are released by the US Department of Labor and present the number of people on the payrolls of all non-agricultural businesses. The monthly changes in payrolls can be excessively volatile, especially after a change of more than 40k employed people expected. The Average Hourly Earnings are released by the US Department of Labor and are a significant indicator of labor cost inflation and of the tightness of labor markets. The Federal Reserve Board pays close attention to when setting interest rates. According to Janet Yellen's testimony, the Fed is to take into consideration all data between now and the December meeting and decide whether delay the rate hike or raise them in December.
Raig Erlam, senior currency analyst at OANDA, reckons that this week's FOMC statement will be "the Fed's last opportunity to convince the market that rates are still on course to be raise this year". In case they exclude this message from the statement, then "they are not going to raise rates this year and we are probably looking more towards the middle of the next year".
USD/JPY attempts to break through Aug 28 high
The Greenback retreated from its intraday high after the US data disappointed yesterday, thus confirming the resistance line at 121.74. This resistance is now under higher pressure, as the US fundamentals are expected to be in favour of the US currency. As a result, the Buck is likely to retake the 122.00 major level and possibly even pierce the resistance cluster around 122.10. However, risks of falling below the Monday's opening price persist, as weekly technical indicators are giving bearish signals and the immediate resistance might cause the USD/JPY to bounce back on weak data.Daily chart
The USD/JPY has been climbing higher since the beginning of the week, and the support trend-line is tested every day, including today. However, the Aug 28 high somewhat keeps providing an obstacle for the Greenback, suggesting the tide could still turn and cause a breach of the up-trend.
Hourly chart
SWFX sentiment deteriorating; OANDA and SAXO Bank traders remain bullish
OANDA and SAXO Bank are similar in the share of their long and short positions. The share of bulls in the market of the Canadian-based broker remain improved to 55% (previously 54%), while the percentage of long positions at SAXO Bank dropped even further: from 52 to 51%.
Spreads (avg, pip) / Trading volume / Volatility
More than two thirds expect the rate to stay above 120 yen
Bullish forecasts for USD/JPY appear to be the more common than bearish ones. According to the survey conducted in October, 72% of the three-month estimates for the currency pair are above 120 yen. The most popular price intervals turn out to be the 120.00-121.50 and the 124.50-126.00 ones, which were chosen in 20% of cases each. However, the second most popular interval, chosen by 16% of the surveyed, was 121.50-123.00. The mean forecast for Feb 06 is 121.5.
Community is almost equally divided on the Greenback
According to traders, their votes divided almost equally, however, bullish outlook has a significant advantage. Long positions take up 52.4% of the market, while short ones the remaining 47.6%.
Jignesh, a member of the Dukascopy Community, explains that the USD/JPY continues sideways without breaking any major support or resistance, since the strong sell-off accompanied by the equity market one. "Last week, the pair tested the upper resistance zone and was unable to break 121.40. While below this level, expecting a continued sell-off this week," he mentioned. On the opposite side of the barricade, csan86, said that "in the middle of October the bullish pressure increased but the bulls were not strong enough to break through the 121.40 level." Csan86 believes the prices can find buyers at 12.40 and it can be the beginning of a new bullish breakout attempt.