- 57% of all pending orders are to sell the Greenback
- 67% of all open positions are short
- Immediate resistance lies around 112.15
- The closest support rests at 110.82
- Upcoming events: US Existing Home Sales, US Durable and Core Durable Goods Orders, FOMC Meeting Minutes
US consumer prices see the biggest increase in six months in October amid higher gasoline and rent costs. According to the US Department of Labor, the Consumer Price Index advanced 0.4% last month, following September's gain of 0.3%. On a yearly basis, consumer prices grew 1.6% in October, the largest annual increase since October 2014, up from the preceding month's 1.5%. Both readings came in line with analysts' expectations.
Nevertheless, the so-called core CPI, which excludes prices for volatile items such as energy and food, rose 0.1% in the reported month, unchanged from September, while market analysts anticipated a slight increase to 0.2%. Year-over-year, core consumer prices fell to 2.1% in October, following the prior month's 2.2% gain. Higher inflation as well as the strong labor market are likely to encourage the Federal Reserve to raise its key interest rates at its next meeting in December. The Central bank increased its key overnight interest rate in December 2015 for the first time since the global financial crisis. The Labor Department said gasoline prices surged 7.0%, up from September's 5.8%, whereas food prices remained unchanged. Within components of the core CPI, rents rose 0.4%, while medical care costs were unchanged. The price of prescription drugs rose 0.2%.
No significant events until Wednesday
Tuesday is relatively quiet, but some attention could be paid to the US Existing Home Sales. They provide an estimated value of housing market conditions. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD. The main events, however, will be on Wednesday, namely the US Durable and Core Durable Goods Orders. They measure the cost of orders received by manufacturers for durable goods, which means goods planned to last for three years or more, such as motor vehicles and appliances. As those durable products often involve large investments they are sensitive to the US economic situation. The final figure shows the state of US production activity. The Core Durable Goods Orders, however, the transport sector in order to capture a more accurate calculation. Nevertheless, the most important event on Wednesday will be the FOMC Meeting Minutes. FOMC stands for the Federal Open Market Committee, that organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses and risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.USD/JPY to keep edging higher
The Buck failed to post gains on Monday, but still managed to preserve the ascending channel pattern, as the immediate support area, namely the monthly R3 and the channel's lower border, remained intact. Technical studies remain in favour of the positive outcome, implying that the US Dollar is to outperform the Yen again today. The pair has been appreciating for a couple of days and experiencing a small decline once in a while, which is believed to be what happened yesterday. Consequently, the pair has the potential to reach the 112.20 level today, formed by the Bollinger band and the weekly R1.Daily chart
A failure to appreciate on Monday caused the USD/JPY currency pair to slightly breach the ascending channel's support line, but that does not indicate a full-blown breach. The exchange rate could still return within the pattern's borders today, unless another relatively sharp decline takes place, causing a drop below the 200-hour SMA circa 109.00.
Hourly chart
There are 67% of all open positions are short today, compared to 53% on Monday. At the same time, 57% of all pending orders are to sell the Greenback, five percentage points more than yesterday.
Meanwhile, there has been an increase in the number of long positions at other brokers. Right now 61% of OANDA clients are bears, compared to 57% on Monday. In the meantime, Saxo Bank clients are still slightly on the bearish side, being that the portion of shorts takes up 52% of the market.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish the Dollar
According to the poll that gathered forecasts between October 22 and November 22, traders expect the US Dollar to appreciate to 107.56 yen in three months' time, while the forecast for November 30 was only 103.30 yen. It is also worth noticing that 52% of all forecasts fall below 108 yen, which is close to the current spot price. The majority of people voted expect the US Dollar to cost somewhere between 111.00 and 112.50 yen in three months, with 24% of the survey participants choosing that trading range. Meanwhile, the second most popular interval is the 105.00-106.50 one, chosen by 16% of all the surveyed, compared to popularity of the 106.50-108.00, 108.00-109.50 and 109.50-111.00 intervals.