USD/JPY attempts to change its course

Source: Dukascopy Bank SA
  • The portion of orders to acquire the USD edged higher from 43 to 58%
  • Bearish market sentiment remains unchanged at 58%
  • The monthly S2 at 117.63 is the nearest resistance
  • Immediate support is around 117.14, represented by the Bollinger band
  • 60% of the survey participants expect the US Dollar to cost less than 123.00 yen in three months
  • Upcoming events today: US Labor Market Conditions Index, Japanese Current Account, US Jolts Job Openings, BoJ Gov Kuroda Speech, FOMC Member Fischer Speech

© Dukascopy Bank SA

A gradual increase in the US NFP data on Friday contributed to the Greenback's appreciation against most major peers on Friday and over the weekend. The US Dollar advanced the most against three major currencies, namely 1.31% against the Kiwi, 0.85% versus the Aussie and 0.69% against the Sterling. The EUR/USD remained relatively unchanged, edging 0.05% lower, whereas the Buck suffered a 0.35% decline against the Japanese Yen.

The US economy created 292,000 jobs in December, in line with analysts' expectations for solid and steady growth. The Labor Department revised the previous two months data, saying that the economy added a net 50,000 new jobs more than initially reported. November payrolls were up 252,000, while the October gain was 307,000. The unemployment rate stayed at 5% last month, while average hourly wages remained flat. The jobless rate, which has dropped since hitting the 10% mark in October 2009, is now hovering just above what economists deem full employment, the point where further declines could start to push up inflation. Meanwhile, average hourly earnings were virtually flat in December, which was disappointing. Economists hoped to see a 0.2% rise in paychecks. When compared to a year ago, wages climbed 2.5%, which matches October's print for a post-recession high.

On the upside, the labour force participation rate ticked up a tenth of a percentage point to 62.6% as the labour force grew by 466,000 persons. In a sign of confidence in the economy, the Fed in December hiked borrowing costs that had helped stimulate the economy since the Great Recession. The Fed's 10-member voting committee said in meeting minutes that the labour market, though still shy of its full potential, showed "further improvement" and "confirmed that underutilization of labor resources had diminished appreciably since early this year."

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".

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."

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Quiet Monday

There are no significant events to influence the USD/JPY on Monday, therefore, focus turns to the fundamental events on Tuesday, such as the US JOLTS Job Openings. The US JOLTS Job Openings data is due on Tuesday as well. It shows the number of job openings during the reported month, with exception of the farming industry. Even though it is released late, it might still have a significant impact, as this release is connected with the overall employment. Nevertheless, earlier on Tuesday Japanese Current Account is due, which is the difference between imported and exported goods and services; however, the BoJ Governor's speech is the event that should cause most volatility for the pair.

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 change its course

Despite a strong reading of the US Non-Farm Payrolls on Friday, the USD/JPY was unable to maintain trade in the green zone. The pair retreated from intraday gains and breached the key support, breaking the three-year up-trend, as the Yen's safe haven status prevailed. The bearish trend appears to be intact, as the Greenback keeps struggling to outperform the Japanese currency. A failure to rebound is likely to lead the Buck towards the 2015 low of 115.85, as the immediate support lacks the strength to limit the losses. Meanwhile, the monthly S2 is to prevent the pair from climbing up.


Daily chart
© Dukascopy Bank SA

The Greenback was unable to trade above 118.00 on Friday, ultimately falling down to 116.80, thus, confirming the trend-line. The Buck is now seen recovering from this down-trend, but it is uncertain whether the USD/JPY will be able to maintain the bullish momentum, as another confirmation of the trend-line is possible.

Hourly chart
© Dukascopy Bank SA


Bears dominate the market

Bearish market sentiment remains unchanged at 58%, whereas the portion of orders to acquire the USD edged higher from 43 to 58%.

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 improved, as 66% of their traders hold long positions, compared to 69% on Friday; meanwhile, the long and short positions at SAXO Bank now take up 60% and 40% of the market, respectively.













Spreads (avg, pip) / Trading volume / Volatility


More than a half expect the exchange rate to fall under 123 yen

© Dukascopy Bank SA

According to the survey conducted between Dec 11 and Jan 11, the US Dollar is expected to cost 119.92 yen in three months. However, according to the most popular price interval, the US Dollar is likely to cost between 114.00 and 115.50 yen after three months; this price interval was selected by 34% of the voters. The second choice was higher, as 15% of the voters chose the 123.00-124.50 interval. Meanwhile, the majority of 60% believe that the Greenback is to fall below 123.00 yen after a three month period.

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