- The number of sell orders edged up from 58 to 59%
- There are now 66% of bearish traders
- The 20-day SMA at 121.46 is the nearest support
- Immediate resistance is around 121.60, represented by the weekly S2, 100 and 200-day SMAs
- 50% of the survey participants expect the US Dollar to cost more than 124.50 yen in three months
- Upcoming events today: US Retail and Core Retail Sales, US PPI and Core PPI, US Preliminary UoM Consumer Sentiment, US Business Inventories
The Buck appreciated against most major peers on Thursday, with exception against the Kiwi and the Aussie. The US currency added 0.77% versus the Euro, followed by a 0.46% gain against the Swissie and 0.33% against the Loonie. The USD/JPY remained relatively unchanged, advancing only 0.10%, whereas the Greenback slumped 0.69% and 0.51% against the Aussie and the Kiwi, respectively.
The number of Americans applying for unemployment benefits unexpectedly increased to the highest level in five months last week. Yet, the sharp jump did not mean deterioration in the labour market, as the underlying trend remained consistent with tightening conditions. Initial claims for jobless benefits surged 13,000 to a seasonally adjusted 282,000 for the week ended December 5, the highest level since early July, according to the Labor Department. The four-week moving average, considered a better gauge of labour market trends as it irons out week-to-week volatility, climbed by 1,500 to 270,750 last week. Claims have been below the 300,000 threshold, which is associated with strengthening labour market, for 40 consecutive months. This is the longest such streak since the early 1970s. As the labour market approaches full employment, little room remains for further decreases.
Meanwhile, a separate report showed the US imported less deflation than expected in November, as import prices declined only half as much as analysts estimated. Prices of products shipped into the country dropped 0.4% in the reported month, compared with the 0.8% decrease predicted by analysts. In annual terms, import costs were 9.4% lower last month than a year ago.
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 Retail and Core Retails sales are the main Friday's drivers
With no relevant Japanese fundamental data today, focus shifts to the US ones. The most important ones are the US Retail and Core Retail Sales. The Retail Sales are released by the US Census Bureau and measure the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. The Core Retail Sales, however, exclude automobile sales and could also be revised rather significantly at a future date. Both of the releases are forecasted to show a stronger figure, thus, boosting the US currency. At the same time, the US PPI is due, which measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Changes in the PPI are widely followed as an indicator of commodity inflation. The PPI is also expected to rebound.
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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 makes another effort to erase Wednesday's gains
The tough resistance cluster prevented the USD/JPY from posting serious gains on Thursday. Although the pair remains under the pressure of the immediate resistance cluster, the set of fundamental data could provide sufficient impetus for the Buck to edge higher. In this case the cluster, represented by the monthly PP and weekly S1 at 122.36, should limit the gains. Nevertheless, the Greenback remains under the risk of falling even deeper, with the closest target to hold the dips resting at 122.99, a breach of which should trigger an even sharper sell-off towards the Nov low at 120.25.Daily chart
The USD/JPY appears to have regained its bullish momentum yesterday and is on the rise again today. The 200-hour SMA could prevent this rally even if the Buck receives a boost from the US fundamentals today, as this week's losses are not to erased, according to technical studies.
Hourly chart
SWFX sentiment strongly bearish
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 slightly worsened today, from 64 to 62%; while the long and short positions at SAXO Bank now take up 57% and 43% of the market, respectively.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the rate to stay above 123 yen
The majority of forecasts appear to be centered around the 124.50 price level. However, a half of traders believe the US Dollar will cost even more after a three month period. The most popular price interval was 124.50-126.00, selected by slightly less than a fifth (18%) of the voters, whereas the second most popular choice is between 126.00 and 127.50 yen, chosen by 14% of the surveyed. The mean forecast for Mar 11 is 123.33.
Traders believe the pair will continue moving to the south, as the consensus forecast stands for 123.9– more than 100 pips above the current market price. At the same time, for the third straight week, around 60-70% of respondents are having bullish view on the pair.
According to csan86, the bears would like to defend the 123.65-123.80 price zone. "This pair is ranging on four-hour and I cannot see any price action which can increase the probability for the breakout," he said, also adding that "if the breakout happens at 125.00-125.25, there can be the next zone where the bears try to defend their positions".
On the other side of the barricade rokasltu suggests that the USD/JPY advance seems to be limited, despite economic data, which signals the Fed's rate increase is quite possible. As a result, he is not expecting big movements during this week, but still goes for a slight decline of the pair.