- 61% of all pending orders are to acquire the US Dollar
- Market sentiment is equally divided between the bulls and the bears
- Immediate resistance lies at 117.90
- The closest support rests around 117.00
- Upcoming Events: US ADP Non-Farm Employment Change, US Initial Jobless Claims, US Services PMI, US Crude Oil Inventories
Growth in the US economy's manufacturing sector improved more than expected last month, official figures revealed on Tuesday. The Institute of Supply Management reported its Purchasing Managers' Index advanced to 54.7 in December, surpassing analysts' expectations for 53.7 points. Back in November, the Index climbed to 53.2 from October's 51.9 points. This was the fastest pace of growth seen in five months. Any reading above the 50 point level indicates expansion in the manufacturing sector. Of the 18 manufacturing sectors, 11 reported growth last month, according to Bradley Holcomb, chair of the ISM Manufacturing Survey Business Committee.
Other data released on the same day by the Department of Commerce showed that construction spending grew 0.9% to $1.18 trillion in November, the highest point since April 2006, compared to the previous month's upwardly revised gain of 0.6%. In the meantime, economists expected construction spending to rise just 0.5% in the reported month. The November reading together with the October upwardly revised figure could prompt analysts to revise up their overall US economic growth forecasts for the last quarter of 2016.
US ADP Non-Farm Employment Change and Services PMI
On Thursday attention turns to the US ADP Non-Farm Employment Change. It is a measure of the change in the number of employed people in the US. Generally speaking, a rise in this indicator has positive implications for consumer spending, stimulating economic growth, so a high reading is traditionally seen as positive or bullish for the USD, while a low reading is seen as negative or bearish. Another event that could have some impact on the USD/JPY pair will be the US Services PMI. It captures business conditions in the services sector. As the services sector dominates a large part of total GDP, the Services PMI is an important indicator of the overall economic condition in the US.Bears push USD/JPY below 116.00
Even though the USD/JPY currency pair weakened on Wednesday, it still remained within its weekly trading range, namely between 117.00 and 117.90. Earlier today the pair fell victim of hard selling, causing the exchange rate to drop under the 116.00 handle. At this point the closest support is unlikely to be of any use, with all attention being on the cluster around the same 116.00 mark, where the weekly S1, the monthly PP and a support trend-line are located. However, technical studies insist the Buck is to edge higher today; given the nature of the fundamental data today, positive readings could cause the pair to recover from its intraday lows, but this scenario is highly unlikely.Daily chart
The 200-hour SMA failed to prevent the USD/JPY pair from plunging on Wednesday, as its breached caused a sharp decline below the 116.00 level earlier today. The pair appears to have bottomed out at 115.60, with bulls taking over the market once again. However, weak fundamental readings could renew the bearish pressure and still cause the exchange rate to close under 116.00 today.
Hourly chart
Market sentiment is now equally divided between the bulls and the bears, while 61% of all pending orders are to acquire the US Dollar.
Right now 53% of OANDA clients are bears, compared to 56% on Wednesday. In the meantime, Saxo Bank broke out of the perfect equilibrium, being that 51% of their open positions are now long and the remaining 49% are short.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish on the Dollar
According to the poll that gathered forecasts between December 05 and January 05, traders expect the US Dollar to appreciate to 118.17 yen in three months' time, while the forecast for November 30 was only 103.30 yen. It is also worth noticing that 61% of all forecasts fall above 117 yen, which is close to the current spot price. The majority of people voted expect the US Dollar to cost somewhere between 120.00 and 121.50 yen in three months, with 15% of the survey participants choosing this trading range. At the same time, the second most popular interval was the 118.50-120.00 one, with 13% of survey participants choosing it.