- The portion of buy orders inched down from 69 to 59%
- 52% of all open positions are short
- Immediate resistance lies at 114.80
- The closest support rests around 114.35
- Upcoming events: US Core PCE Price Index, US Personal Spending and Income, US Pending Home Sales, Japanese Household Spending
US economic growth slowed markedly in the last quarter of 2016 amid lower shipments of soybeans that bolstered exports. The Commerce Department reported the economy grew at an annualized pace of 1.9% in the three month period to December, after expanding 3.5% in the Q3. Market analysts expected the economy to grow at a 2.2% rate in the Q4. For all of 2016, growth was 1.6%, the weakest since 2011. Low oil prices and the strong US Dollar put downward pressure on the economy last year. In the Q4, exports posted a 4.3% decline, the largest since the Q1 of 2015, compared to a 10% surge in the prior quarter. Weak exports contributed most to the fourth-quarter drop, offsetting strong consumer spending and business investment. The Commerce Department reported also that orders for durable goods dropped 0.4% month-over-month in December, missing expectations for a 2.7% increase.
Meanwhile, November's fall was revised up to 4.5% from 4.6%. The December decline was mainly driven by low orders for defense capital goods, which fell 33.4%, the largest monthly drop since May 2014. Excluding automobiles and transportation equipment, orders for core durable goods climbed 0.5%, in line with analysts' forecasts, whereas the previous month's gain of 0.5% was revised up to 0.6%.
A relatively busy Monday
Monday brings several events from the US side, which could potentially influence the USD/JPY pair's performance during the day. First of all, the US Core PCE Price Index, which is an average amount of money that consumers spend in a month. "Core" excludes seasonally volatile products such as food and energy in order to capture an accurate calculation of the expenditure. It is a significant indicator o inflation. Second, the Personal Income, as it measures the total income received by individuals, from all sources, including wages and salaries, interest, dividends, rent, workers' compensation, proprietors' earnings, and transfer payments. This figure can provide insight on the US employment situation. As for the Personal Spending, it measure purchases of goods and services by households and by nonprofit institutions that serve households from private business. Finally, the US Pending Home Sales. They are a leading indicator of trends of the housing market in the US. They capture residential housing contract activity of existing single-family homes. As the housing market is considered as a sensitive factor to the US economy, it generates some volatility for the USD. From the Japanese side attention should be paid to the Overall Household Spending, which is an indicator that measures the total expenditure by households. The level of spending can be used an indicator of consumer optimism. It is also considered as a measure of economic growth.USD/JPY attempts to reclaim 115.00 again
In spite of a weaker US GDP reading on Friday, the Greenback still managed to outperform the Japanese Yen, successfully reclaiming the 115.00 level. The Buck is expected to retain its strength and continue outperforming the Yen, but there is still an issue that could prevent the pair from edging higher: the USD/JPY opened with a bearish gap under 115.00, while also having the 20 and the 55-day SMAs providing immediate resistance just above the opening price. The US Dollar's rally is unlikely to last, as we are about to have a sell signal, implying the pair is to edge lower by week's end. At the moment, technical studies are unable to confirm either scenario.Daily chart
The USD/JPY pair now appears to have formed an ascending channel pattern, where trade is expected to continue after the four-week down-trend was breached. This channel could help the pair reach the second bearish trend-line, located in between the 117.00 and the 118.00 major levels, unless fundamental or political factors trigger a downside breakout this week.
Hourly chart
Today 52% of all open positions are short (previously 50%). Meanwhile, the portion of buy orders inched down from 69 to 59%.
Right now 52% of OANDA clients are bears, compared to 50% on Friday. In the meantime, Saxo Bank clients remain on the bullish side, being that 54% of their open positions are now long and the remaining 46% 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 30 and January 30, traders expect the US Dollar to appreciate to 117.30 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 above 117 yen, which is above 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 13% of the survey participants choosing this trading range. At the same time, the second most popular interval was the 120.00-121.50 one, with 12% of survey participants choosing it.