- The portion of buy orders edged up from 65 to 73%
- 55% of all open positions are short
- Immediate resistance lies at 115.66
- The closest support rests around 114.00
- Upcoming events: US Empire State manufacturing Index, US CPI and Core CPI
US retail sales rose more than expected last month amid higher demand for furniture and automobiles, figures showed on Friday. According to the Department of Commerce, retail sales advanced 0.6% in December, following the preceding month's upwardly revised 0.2% gain and surpassing analysts' expectations for an increase of 0.5%. The following increase provided further evidence that the US economy gained momentum in the last three months of 2016. In addition, retail sales grew 4.1% on annual basis and 3.3% over the past year. Sales of automobiles contributed most to this increase, jumping 2.4%.Excluding volatile items, sales climbed 0.2% last month, compared to November's upwardly revised rise of 0.3%, while analysts anticipated an increase of 0.5% during the reported period. Separately, the Department of Labor reported its Producer Price Index surged 0.3% in December, after rising 0.4% in the prior month.
However, the reading topped economists' forecasts for a 1.1% increase. The PPI grew 1.3% compared to the same period one year ago and 1.6% for all of 2016. The rise was mainly driven by stronger oil prices that rose above $50 per barrel over the past months. In the meantime, the University of Michigan said its flash Consumer Confidence Index fell to 98.1 in January, following December's final reading of 98.2 and missing expectations for 98.6.
No solid events until Wednesday
There is a bank holiday in the US today and tomorrow there is only one data release, namely the Empire State Manufacturing Index. It gauges business conditions for New York manufacturers, but tends to have a limited impact on the USD pairs. However, on Wednesday attention should be paid to the US inflation data, namely the CPI. It 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. In Core CPI food and energy are excluded from calculations in order to capture a more accurate reading.USD/JPY keeps struggling to edge higher
On Friday the US Dollar continued to weaken against the Japanese Yen, following its two-week bearish trend, however, losses were insignificant. The given pair now has sufficient room for a leg up, with the weekly PP and the two-week down-trend forming immediate resistance only around 115.50, meaning the USD/JPY could surge more than 100 pips within the next three days. On the other hand, technical studies cannot fully confirm this outlook, thus, we should not rule out the possibility of the pair continuing to put the monthly S1 at 113.74 to the test.Daily chart
Upon topping out on Friday, the US Dollar began sliding down again, making its way towards the 23.60% Fibo level. The Fibo appears to be providing sufficient support for now, with a retest of the down-trend near 116.00 eventually expected, unless the 114.00 mark is breached, as some attempts have recently been made.
Hourly chart
Bears grew stronger over the weekend, being that 55% of all open positions are now short (previously 53%). At the same time, the portion of buy orders edged higher, namely from 65 to 73%.
Right now 53% of OANDA clients are bears, compared to 54% on Friday. In the meantime, Saxo Bank clients remain on the bullish side, being that 53% of their open positions are now long and the remaining 47% 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 16 and January 16, traders expect the US Dollar to appreciate to 119.43 yen in three months' time, while the forecast for November 30 was only 103.30 yen. It is also worth noticing that 64% of all forecasts fall above 117 yen, which is above the current spot price. The majority of people voted expect the US Dollar to cost somewhere between 123.00 and 124.50 yen in three months, with 18% of the survey participants choosing this trading range. At the same time, the second most popular interval was the 124.50-126.00 one, with 15% of survey participants choosing it.