- The portion of orders to acquire the US Dollar declined from 60 to 47%
- Almost three quarters (74%) of traders are short the Buck
- The nearest resistance is at 117.60, namely the monthly S1 and the 20-day SMA
- Major demand area is seen circa 114.75 yen
- 54% of the survey participants expect the US Dollar to cost more than 120 yen in three months
- Upcoming events: US Crude Oil Inventories, Fed Chair Yellen Testimony, US Federal Budget Balance
In spite of a rather good reading of the US JOLTS Job Openings, the US currency sustained rather heavy losses, with exception against the Aussie. The AUD/USD edged 0.23% lower, whereas a massive 1.44% loss was seen against Swiss Franc. At the same time, the EUR/USD climbed 0.90% higher, while the USD/JPY slumped 0.64%. The NZD/USD, however, remained relatively unchanged, edging only 0.12% higher over the day.
The number of job openings in the US surged more than expected in December, adding to signs that the labour market continues to improve. According to the Labor Department, US companies advertised 4.9% more jobs in the reported month, totalling 5.6 million, the most since July. The JOLTS report is among the data closely watched by the Fed officials. The increase raised the job openings rate to 3.8% from 3.6% in November. At the same time the hiring rate remained unchanged at 3.7%, indicating that employers faced challenges to find qualified workers for vacant positions. A total of 3.1 million Americans quit their jobs in December, the highest number since 2006, pushing the quits rate, a measure of confidence in the jobs market, to 2.1%, the highest level since 2008. The report came ahead of Fed Chair Janet Yellen testimony to Congress later in the day. A number of disappointing economic reports, plunging oil prices and a stock market sell-off have fuelled doubts as to whether the Fed would raise interest rates this year.
However, the data last week showed the US unemployment rate declined to 4.9% in January, down from 5.0%. In addition to that, average weekly earnings increased 12 cents an hour or 0.5% on a monthly basis, translating into a 2.5% annualized gain. As the unemployment rate remains low, many economists expect Americans to see paychecks increase.
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 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.
Janet Yellen testifies in front of the Financial Services Committee
Although a number of economic events and data releases concerning the US are scheduled for today, the most important one is the Fed Governor's Testimony in front of the Financial Services Committee, where she is to comment on the economic conditions in the country. Afterwards, the Financial Services Committee will be able to ask additional questions, answers to which tend to cause high volatility and could cause the USD crosses to erase previous intraday gains or losses. Insight concerning next week's and the year's overall monetary policy is expected to be provided, as speculators and many economists believe that the Fed is unlikely to keep raising rates this year.USD/JPY: market turmoil remains
The USD/JPY settled in front of the immediate support cluster yesterday, managing to partially recover from the daily low of 114.20. Demand for safe-haven assets such as the Yen remains high, thus, we could expect a breach of the immediate support, with the second target to limit the losses being the monthly S2 at 113.88. Nevertheless, a hawkish tone of the Fed's governor today could provide sufficient impetus for the bulls to push the Greenback back over the 116.00 mark.Daily chart
The USD/JPY pair extended trade within the descending channel's borders yesterday, but unable to touch the resistance line. The perfect outcome today would be a bounce off of the upper border with a drop towards the 113.00 mark, which Yellen's testimony might trigger.
Hourly chart
SWFX sentiment stays bearish; elsewhere sentiment is bullish
Traders at OANDA and Saxo Bank have a diametrically opposite view of the pair's future. Clients of both brokers are mostly bullish. Canadian-based foreign exchange company reports that 66% of open positions are long, and the Danish bank reports that 58% of its clients' positions are long, compared to 59% previously.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to rise above 120 yen
The largest half of the survey participants (54%) expect the US Dollar to cost more than 120.00 yen in three months. The most popular choice is the 120.00-121.50 price interval, selected by 19% of the voters; however, according to the votes collected between Jan 10 and Feb 10, the mean forecast for May 10 is 119.25. At the same time, 12% of the surveyed believe the Greenback could fall either in the 114.00-115.50 or the 121.50-123.00 price interval after a three month period.
Over the week market sentiment improved for the benefit of USD/JPY's bears. At the same time, a fragile majority (52%) of all participants in the quiz see the Buck rebounding in the period of February 5-12.
According to Likerty, "USD/JPY wants to test 119.40's before continuing its bearishness." He also mentioned that the "inability to hold 116.80's opens 116.1x, after which bullishness will have its chance again."
Babanu, a trader of the Dukascopy Community, believes that during the last day of the previous week "we had a steep drop of this pair, and a decline is most likely to continue due to the lack of ability from the BoJ to weaken the Yen and recent weakness in the US Dollar."