- The portion of sell orders increased by 5% points up to a total of 63%
- Bearish traders' sentiment remains unchanged at 59%
- The weekly PP at 118.30 is the nearest resistance
- Immediate support is at 117.63, represented by the monthly S2 and the up-trend
- 55% of the survey participants expect the US Dollar to cost less than 120.00 yen in three months
- Upcoming events today: US Crude Oil Inventories, US Beige Book, US Federal Budget Balance, Japanese Core Machinery Orders, Japanese PPI, US Jobless Claims, US Import Prices, FOMC Member Bullard Speech,
The American Dollar was able to post gains against most major peers on Tuesday, with exception versus the Yen. The Greenback surged the most versus the Sterling, adding 0.65%, while also posting moderate gains of 0.35% and 0.32% versus the Kiwi and the Loonie, respectively. The US Dollar had trouble appreciating versus the Aussie (0.10%) and the Swissie (0.07%), while it remained almost completely unchanged against the Euro, adding only 0.01%. At the same time, the USD/JPY went 0.09% lower.
The US labour market continued to tighten as job openings rose, while the quits rate remained steady, supporting the Fed on the path to normalizing monetary policy. US companies are struggling to fill a higher number of job vacancies than in much of the past 12 years. Many workers hesitate to quit their job, signalling Americans remained concerned about employment prospects even with 5% jobless rate.
The number of vacant positions climbed to 5.43 million in November following a downwardly revised 5.35 million openings a month earlier, according to the Labor Department. The number of openings increased from 4.89 million a year ago, after having reached a record-high of 5.67 million in summer. The JOLT report followed a series of other labour market indicators, which pointed to some improvement in the market. Last week, the monthly jobs report showed almost 300,000 jobs were created in December. Furthermore, the report showed companies hired a total 5.2 million workers in November, compared with 5.17 million a month earlier. The hires rate held at 3.6%, where it has been steady since hitting the high of the current business cycle at 3.7% in June. Meanwhile, the quits rate was steady at 2% in November, shy of its pre-recession peak of 2.3% reached in November 2006, when almost 3.1 million quits were registered.
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."
US Beige Book and Federal Budget Balance
Today's attention should be aimed at the US fundamentals today, namely the Fed's Beige Book and the Monthly Budget Statement. The Beige Book reports on the current US economic situation. Through interviews with key business contacts, economists, market experts, and other sources are gathered by each of the 12 Federal Reserve Districts. The survey gives a picture of the overall US economic growth. At the same time, the Monthly Budget Statement is due. It is released by the Financial Management Service and summarizes the financial activities of federal entities, disbursing officers, and Federal Reserve banks. These are not the best market movers, but they tend to have some impact on USD crosses.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 rises on risk appetite
The monthly S2 was able to keep the USD/JPY from falling deeper yesterday, despite volatility reaching Tuesday's opening price. Although the up-trend was violated last week, this week's USD performance implies otherwise; Chinese fundamentals appear to be improving again, thus, reducing demand for safe haven currencies. As a result, the Greenback is likely to continue climbing higher, with the weekly PP acting as the closest resistance at 118.30. However, technical studies suggest the pair could still fall towards 117.00, as the indicators are now pointing south-ish.Daily chart
Ever since the USD/JPY rebounded in the beginning of the week, the exchange rate was unable to fall beyond the newly-formed up-trend. The trend-line was retested twice yesterday, contributing to a rather strong rebound today, with the price almost reaching the 200-hour SMA around 118.50. As a result, the pair might bounce back and once again retest the up-trend, without a significant fall under 118.00.
Hourly chart
Bears dominate the market
Other market participants, such as OANDA and SAXO Group, have a completely different sentiment, as the majority of their traders hold long positions. Among SAXO Bank 60% of traders are long the US Dollar, whereas 66% of all positions at OANDA are also long.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 123 yen
The largest half of the survey participants (55%) expect the US Dollar to cost less than 120.00 yen in three months. The most popular choice is the 114.00-115.50 price interval, selected by 36% of the voters; however, according to the votes collected between Dec 13 and Jan 13, the mean forecast for Apr 13 is 119.30. At the same time, 15% of the surveyed believe the Greenback could fall in the 123.00-124.50 price interval after a three month period.
Compared to the previous week, the bullish sentiment significantly weakened, as now only 55% of traders expect the pair to rise, comparing to the previous 85% of bullish votes. As a result, the average median for the pair for the end of this week decreased to 117.9.
Rokasltu, a trader with the Duksacopy Community, said that at the beginning of the year the USD/JPY went down quite substantially. "I think, the USD/JPY pair has a potential to regain moderately during this week," he added.
Meanwhile, another member of the Community suggested that the Buck is to weaken versus the Japanese Yen by the end of the week. "I believe, the Dollar should weaken against the Yen, reaching the 115 level in the short term," STARLINE backed his view.