- The share of buy orders increased from 42 to 72%
- 74% of all positions are now short
- The monthly R2 and Bollinger band imply a ceiling at 123.50
- Immediate support is around 122.00, represented by the weekly PP, monthly R1 and 100-day SMA
- Exactly three quarters of the surveyed expect the rate to stay above 120 yen in three months
- Upcoming events today: Japanese Core machinery Orders, Japanese PPI, US Jobless Claims, US JOLTS Job Openings, US Crude Oil Inventories
The Greenback appreciated against most major peers, while remaining relatively unchanged against the others. The most notable gains were versus the Swissie (0.28%), the Euro (0.24%) and the Aussie (0.23%), while the NZD/USD added only 0.03%. Losses also were registered: 0.09% against the Loonie, 0.03% versus the Sterling and 0.02% against the Yen.
US job growth accelerated at a much faster pace than expected in October following two consecutive months of tepid gains, setting the stage for the December rate hike. Nonfarm payrolls surged 271,000 last month, the biggest increase since December 2014, according to the Labor Department. The number was well above economists expectations of 182,000 new jobs. Payrolls data for August and September were revised to show 12,000 more jobs added than previously reported. The strong rebound in payroll creation in October lifted the three-month average to 187,000. The US unemployment rate declined to 5.0%, the lowest level in more than seven years.
The employment report joined October's robust services sector and auto sales data in reinforcing views that economic growth will regain steam in the fourth quarter after slowing down sharply to a 1.5% annual pace in the July-September period. The services sector added 241,000 jobs in October, with large gains in retail, health and leisure. Fed policy makers will see one more employment report released in December, about two weeks prior to their final meeting this year. However, given the strong rebound in payrolls in October, few rate setters should doubt that the economy's readiness for a rate hike.
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."
Another quiet day in terms of fundamentals
There is a bank holiday in the US today and no significant events scheduled for the day, suggesting the USD/JPY will have to settle for quiet trade again. However, the Japanese Core machinery Orders are to be released basically at midnight, which are forecasted to rebound significantly. The given pair is unlikely to be affected by the data by the end of today, but should set the mood for the early trade on Thursday, when a number of US fundamentals that could influence the USD are due.
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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 to weaken for the third day
The USD/JPY failed to reach the 122.80 mark, while the immediate resistance cluster prevented the pair from advancing. The Greenback risks falling today as well, due to the lack of potential events to help the exchange rate climb over the resistance around 123.50. Immediate support is still represented by the weekly PP, monthly R1 and the 100-day SMA around 122.00, but the highest level of the cluster, namely the weekly PP, is the only one to be tested. In case the 100-day SMA is breached, the second strong demand area is located at 121.15—the 20 and 200-day SMAs.Daily chart
Yesterday's consolidation brought the USD/JPY closer to the support trend-line. The pair edged down early morning today and somewhat began regaining the bullish momentum, but remaining under the 123.00 mark for now. Due to a bank holiday in the US, gains are likely to end around the 123.10 point, unless the up-trend is broken.
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 declined from 54 to 53% over the day, while the long and short positions at SAXO Bank are still close to equilibrium, with bulls outnumbering the bears by four percentage points.
Spreads (avg, pip) / Trading volume / Volatility
Exactly three quarters 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, 75% of the three-month estimates for the currency pair are above 120 yen. The most popular price interval turns out to be the 124.50-126.00 one, which was chosen in a quarter (25%) of cases. However, the second most popular interval, chosen by 18% of the surveyed, was 120.00-121.50. The mean forecast for Feb 11 is 122.3.
Compared to the previous week, traders' opinions changed significantly. Today close to 90% of them are bullish, expecting the US Dollar to outperform the Japanese Yen by the end of the week.
One of the traders amongst the bulls, a member with a rather strange community nickname, consisting of only three question marks, commented that "the USD/JPY have broken 121.75% level as well as the trend-line." He, therefore, believes the market will surely go upside and touch the 124.43 level.
Among the remaining 12.5% of bearish traders, Daniil_Stolnikov, said that the resistance did not manage to reach the 123.33 level, hence he is expecting a bearish development.