- Portion of buy orders increased from 58 to 61%
- Just as 24 hours ago, 72% of open positions are short
- Pair has the potential to test 119.70/60 today
- Support trend-line is at 118.70
- 59% of the survey participants expect the US Dollar to cost less than 120.00 yen in three months
- Upcoming events today: US (Core) Durable Goods Orders, Unemployment Claims, Pending Home Sales
US Dollar was mixed on Wednesday, although this is relatively good performance, considering that yesterday's FOMC comments were bearish. The currency changed from minus 0.32 against Australian Dollar to plus 1.04% against the New Zealand Dollar, which received a strong blow last night, as RNBZ governor Wheeler did not rule out more easing in the future.
In line with expectations, the Fed kept interest rates on hold and said that it was closely following global economic and financial developments. Nevertheless, the US central bank gave no hints that it was changing course on its rate-hiking path ahead. Fed policy makers still argued that the world's number one economy was on track for moderate growth and a stronger labour market even with gradual rate lifts. However, Fed officials acknowledged inflation was estimated to stay "low in the near term" due to the further drops in energy prices, while the US economy's growth slowed late last year. The Fed kept its belief that the ongoing declines in energy prices was transitionary and would pass in the medium term. Yet, the central bank downgraded its view on household spending and business investment growth from "strong" to "moderate". The Fed hiked the federal funds rate in December for the first time in nine years and signalled it was determined to increase it by one percentage point in 2016. However, the actual path of rate hikes will depend on "the economic outlook as informed by incoming data".
The central bank will gather again on March 15-16, while Fed Chairwoman Janet Yellen will testify to Congress about the outlook for the US economy and interest rates on February 10-11.
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.
Durable goods orders and unemployment claims to decrease
01:30 pm GMT will be marked by the monthly US durable goods orders release and the weekly report on the unemployment claims. While the former figure is expected to come out worse than the previous reading, the latter is expected to improve from 293K to 281K. The pending home sales, however, are to show 1.0% growth after a sizeable 0.9% decline in November. Volatility of USD/JPY may then increase around the midnight, when we expect a bundle of data from Japan on unemployment rate, inflation, and household spending.USD/JPY to aim for 120.50 yen above monthly S1
At the moment, USD/JPY appears to be on its way back to the major support trend-line the pair has recently (Jan 4) breached. The price exited the bearish channel (Nov 29-Jan 20) to the upside, meaning we are likely to see the latest rally developing until it hits the level of 120.50 yen. There supply is implied by a number of studies, including the mentioned broken trend-line and 55- and 100-day SMAs, which is sufficient to initiate a strong and prolonged sell-off.Daily chart
In the hourly chart we may also draw a rising trend-line, which is to guide USD/JPY higher during the next few days. If 118.70 holds, today the pair will have the potential to test 119.70/60. Meanwhile, the downside risks will greatly increase, when we get closer to 120.50.
Hourly chart
Traders ignore FOMC
Interestingly enough, we see a diametrically opposite picture among OANDA and SAXO Bank traders. In the first case, 61% of open positions are long. As for the Danish brokerage firm, 57% of its traders are long the Dollar.
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 (59%) 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 30% of the voters; however, according to the votes collected between Dec 27 and Jan 27, the mean forecast for Apr 27 is 118.79. At the same time, 12% of the surveyed believe the Greenback could fall in the 120.00-121.50 price interval after a three month period.
Participants of the latest quiz for Dukascopy Community Forecasts seem to wait for more negative data to be released, as now almost 54% of votes are set short on the USD/JPY currency pair, widely supporting the Yen.
Among bearish Dukascopy Community members, nuonrg suggests that the pair has retraced last week up into the Fibonacci 50 percent level from the beginning of December 2015. However, "it can push towards the 61.8%," he commented.
Meanwhile, a traders with the nickname raposo2 has a positive outlook towards the USD/JPY. He mentioned that "for the USD/JPY it is likely that the re-test the support will be at 119.00 level."