- The share of buy orders dropped from 53 to 49%
- 68% of all open positions are now short
- The monthly S1 at 120.98 is the nearest resistance
- Immediate support is around 120.20, represented by the Nov low and the Bollinger band
- 59% of the survey participants expect the US Dollar to cost more than 123.00 yen in three months
- Upcoming events today: US Jobless Claims, US Goods Trade Balance, US CB Consumer Confidence
In the wake of mixed US economic data results on Wednesday, the US Dollar experienced mixed performance. Gains were registered against the Euro (0.42%), the Swiss Franc (0.36%) and the Kiwi (0.20%), whereas the Greenback declined 0.51%, 0.28% and 0.12% versus the Loonie, the Sterling and the Yen, respectively. Furthermore, the AUD/USD remained relatively unchanged yesterday, edging lower 0.03%.
Factory orders for long-lasting goods including autos, airplanes and electronics were flat in November, as a strong Dollar and struggling global economy weigh on US manufacturers. The Greenback has gained almost 20% against the currencies of the US main trading partners over the last 18 months. According to the Commerce Department, non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending plans, dropped 0.4% last month. Core capital goods orders climbed by a revised 0.6% in October. They were previously reported to have increased 1.3%. New orders in the category were down 3.6% through the first 11 months of 2015 compared with the same period a year earlier. Durable goods orders have plunged 3.7% year-to-date.
Gross domestic product expanded at a 2% seasonally adjusted annual rate in the three months through September, the Commerce Department said earlier in the week, driven by a 9.9% growth rate for fixed non-residential investment in equipment. Overall growth appears fairly steady as 2015 comes to an end. Macroeconomic Advisers expected US GDP to rise at a 1.9% pace in the fourth quarter.
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 Jobless Claims is the main event today
As almost every Thursday the US Department of Labor is to release the Initial Jobless Claims today. It is a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labor market. A larger than expected number indicates weakness in this market which influences the strength and direction of the US economy. According to the forecast, the Jobless Claims are likely to remain relatively unchanged, therefore, the impact on the market is to be minimal. This release is also the only significant economic data release on this Christmas day..
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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 extends decline, faces Nov low
The US Dollar suffered another loss against the Yen yesterday, due to another set of poor fundamental data. As a result, trade closed under the key support level, which is likely to lead to more USD weakness. The closest spot to limit the losses today is located around 120.20, represented by the Nov low and the Bollinger band, while the monthly S1 is now providing resistance. However, it will be rather difficult for the Buck to recover from intraday losses today, as there are no solid market movers on the Christmas day. Technical studies are also bolstering the possibility of the bearish outcome.Daily chart
The US Dollar continued sliding down yesterday, but at a slower pace, compared to the beginning of the week. Even though the USD/JPY was circling around the possible up-trend, the confirmation of the line appears to have failed, as the pair dropped significantly lower today, aiming for the Nov low at 120.25. The bullish momentum will doubtfully be regained in order to confirm the up-trend.
Hourly chart
Bears dominate the market
OANDA and SAXO Bank are similar in the share of their long and short positions. The portion of bulls in the market of the Canadian-based broker increased today, with 66% of their traders holding long positions (previously 65%); while the long and short positions at SAXO Bank now take up 64% and 36% of the market, respectively.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the rate to stay above 123 yen
According to the survey conducted between Nov 24 and Dec 24 this year, the US Dollar is expected to cost 122.90 yen in three months. However, the most popular price interval is divided into two, namely 123.00-124.50 and 124.50-126.00, both voted for by slightly less than a fifth, namely 17% of the survey participants. The second choice was higher, as only 11% of the voters chose the 127.50-129.00 interval. Meanwhile, the majority of 59% believe that the Greenback is to remain above 123.00 yen after a three month period.
Distribution between bullish and bearish votes improved considerably in favour of the former this week, as long votes reached 62%, which expect the American dollar to advance. The average prediction for December 25, however, is placed around the 121.2 level.
Gereltod, a member of the Dukascopy Community, believes that the USD/JPY may test the previous high of 125.50 later this month. "The pair continuously ascended since 2012 so its better to keep watch that support line since then," he added.
Meanwhile, agddivisas, another member of the Community said last week that there was "an extraordinary movement at this Friday with a range of 250 pips after BOJ decision." The trader also commented that he thinks this pair will continue falling, with the first target being the 1.2100 level.