- There are still 74% of traders being short the US Dollar
- The portion of orders to acquire the Buck edged higher from 63 to 68%.
- The weekly PP and the 20-day SMA are the nearest support around 122.70
- Immediate resistance is at 123.22, represented by the weekly R1
- 59% of the survey participants expect the US Dollar to cost more than 123 yen in three months
- Upcoming events today: US Pending Home Sales, Chicago PMI, Japanese Final Manufacturing PMI, Japanese Capital Spending
Due to the Fed rate hike stir, the US Dollar advanced against other major currencies on Friday and over the weekend. The Greenback appreciated the most versus the Swissie (0.64%), followed by a 0.58% gain against the Loonie and 0.56% versus the Kiwi. The Buck struggled to outperform the Yen and the Euro the most, adding 0.19% and 0.15%, respectively.
Orders for long-lasting manufactured goods rose in October following two months of weakness, while a key category that tracks business investment plans surged the most in three months. Orders for durable goods soared 3% last month, according to the Commerce Department, driven by an increase in demand for commercial aircraft. A key category that serves as a proxy for business investment spending climbed 1.3% in October, the best result since July, suggesting that the worst of the drag from a strong Greenback and deep spending cuts by energy firms was over.
At the same time, the number of Americans applying for jobless benefits declined more than expected last week, indicating that labour market conditions continued to tighten. Initial claims for state unemployment benefits declined 12,000 to a seasonally adjusted 260,000 for the week ended November 21, the Labor Department said. The preceding week data was revised to show 1,000 more applications were received than reported initially. Claims have now remained below the 300,000 threshold for 38 straight weeks, the longest stretch in years, and stayed close to levels last seen in the early 1970s. Claims below this level are usually associated with a resilient jobs market.
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 Household Spending
In today's speech BoJ's Kuroda stated that Japan's economy is on the path of recovery, boosting the Yen in the early trade. However, the Greenback still appears to have the upper hand, but the fundamental data later today could diminish the possible rally. The US is to release the Pending Home Sales data, which shows the number of homes under contract to be sold, with transactions awaiting to be closed. These Home Sales along with the Chicago PMI are likely to be the main events to influence the USD/JPY in the second half of the day and are also expected to provide mixed figures.
.
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 sets eye on the up-trend
The US currency managed to outperform the Japanese Yen at the end of last week, after edging closer to the weekly low of 122.25. However, the immediate resistance pushed the USD/JPY back, resulting only in a 15-pip gains. Although the Greenback was unable to retake the up-trend, it still refuses to leave the line behind. The weekly PP and the 20-day SMA are holding the pair afloat around 122.70, while the immediate resistance, now represented by the weekly R1 at 123.22, could allow the Buck to return above the 123.00. Technical studies are supporting the bullish outcome.Daily chart
The Greenback managed to rebound on Friday, piercing the down-trend and meeting another resistance only near 122.85, namely the 200-hour SMA. The USD/JPY is currently attempting to breach the given SMA; however, the pair is required to stabilise above 123.00 in order to trigger a recovery towards the two-week high 123.75.
Hourly chart
SWFX sentiment strongly 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 increased from 60 to 61%, while the long and short positions at SAXO Bank now take up 59% and 41% of the market, respectively.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the rate to stay above 123 yen
Bullish forecasts for USD/JPY appear to be the more common than bearish ones. According to the survey conducted in October, 59% of the three-month estimates for the currency pair are above 123 yen. The most popular price interval turns out to be the 124.50-126.00 one, which was chosen in almost a quarter (21%) of cases. However, the second most popular intervals, each chosen by 11% of the surveyed, were 126.00-127.50 and 127.50-129.00. The mean forecast for Mar 01 is now 124.14.