- The share of sell orders added 14% points up to 68%.
- 70% of all positions are short
- The weekly PP at 117.28 is the nearest support
- Immediate resistance is at 117.63, represented by the monthly S2
- 57% of the survey participants expect the US Dollar to cost less than 120.00 yen in three months
- Upcoming events today: US Building Permits, US CPI and Core CPI, US Housing Starts, US Crude Oil Inventories
On Tuesday the US currency experienced mixed performance, having appreciated against some major peers, but also declined against the others. Gains of 0.60% and 0.63% were registered against the Sterling and the Kiwi, respectively; whereas the USD/JPY edged only 0.27% higher, witch the USD/CAD adding even less - 0.13%. Meanwhile, a loss of 0.61% was seen against the Aussie, while the EUR/USD edged 0.14% higher and the USD/CHF inched 0.18% lower.
American shoppers curbed their spending last month, fuelling concerns about the momentum in consumer spending heading into 2016. Sales at retailers declined 0.1% from the previous month to a seasonally adjusted $448.1 billion in December, according to the Commerce Department. Retail sales rose 0.4% in November, compared with an initially reported 0.2% gain. From a year earlier, sales grew just 2.1% in 2015, marking the slowest increase in the six-year expansion. Consumer spending is a key catalyst of the US economic growth, representing more than two-thirds of economic output. Household consumption has helped the world's number one economy grow in recent quarters despite a stronger Dollar and weak demand overseas, which have hit US exporters.
A separate report showed US producer prices declined in December, underscoring persistently low inflation. The producer price index, which measures the prices companies receive for goods and services, dropped 0.2% in December, the Labor Department reported. Excluding volatile food and energy categories, core prices inched up 0.1%. Overall producer prices were down 1.0% in December from a year earlier, the 11th consecutive year-over-year decline. Core prices increased 0.3% from a year earlier.
Vatsal Srivastava, director at the Blackwater Consulting, explains why the US Dollar is a advancing against the Yen this week. Even though he says that there was nothing fundamentally driving the USD/JPY on Monday, one of the key drivers is the falling oil prices, which is actually boosting the Yen, in his opinion, as there is an addition cause for more QQE. Vatsal Srivastava also mentions that "it is going to be a hard economic ride ahead and there seems to be no light on the horizon for Japan as of now". "Lets hope for the best," he added.
US CPI and Building Permits
First of all, the US CPI, which is released by the US Bureau of Labor Statistcs and is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchase power of USD is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. The Core CPI, however, excludes Food and Energy. Both CPIs are forecasted to remain unchanged, but the US Building Permits are expected to fall. They Building Permits show the number of permits for new construction projects. It implies the movement of corporate investments (US economic development) and tends to cause some volatility to the USD. At the same time, the Housing Starts figure is to be released, which is the annualized number of new residential building that began constructing during the previous month, and their number is expected to grow. However, with all CPI should remain the main driver, with any changes pushing the USD crosses accordingly.USD/JPY slumps on risk aversion
Even though the USD/JPY's volatility stretched out to the second resistance, the pair still ended its rally in front of the closest one, namely the monthly S2. The risk-off sentiment eventually kicked in today, causing the Buck to lose ground and drop to the lowest level this week, at the moment of writing. Technical studies support the possibility of the negative outcome, but improvements in US fundamentals could help the Greenback recover from intraday lows and limit the losses near the weekly PP. Contrariwise, weak data is to contribute to the sell-off, leading the pair closer to the 2015 low.Daily chart
As was anticipated, upon reaching the 118.00 psychological level, the USD/JPY experienced a sell-off, which lasted through today's morning as well. The pair tested the 116.00 level, being only 18 pips away from the 2015 low. We should see trade remain between the 2015 low and the 200-hour SMA until the fundamentals cause volatility in either direction if the figures surprise too much.
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, 61% of traders are still long the US Dollar, whereas 67% of all positions at OANDA are also long (previously 64%).
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 120 yen
The largest half of the survey participants (57%) 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 33% of the voters; however, according to the votes collected between Dec 20 and Jan 20, the mean forecast for Apr 20 is 118.73. At the same time, 12% of the surveyed believe the Greenback could fall either in the 120.00-121.50 or 123.00-124.50 price intervals after a three month period.
Traders still believe the pair will continue its depreciation, since only 48% of Dukascopy Community members are bullish.
A trader on the bullish side, namely raposo2, suggested that if situation on the global stock markets got better at the beginning of the week, then there would be a big chance the given pair would stay in long-term consolidation between 116.00 and 123.70. "In short term I see some opportunities for little upward movement to 118.40," he added.
On the bearish side, babanu commented that "everybody expected this pair to soar to the sky after the reference increase by the Fed, but strong Yen and sluggish figures from the US sent this pair to the South," supporting his view.