- 53% of all pending orders are to purchase the Buck
- 51% of all open positions are short
- Immediate resistance lies around 114.50
- The closest support rests circa 113.50
- Upcoming events: US Employment Cost Index, Chicago PMI, US CB Consumer Confidence
Consumer spending in the United Sates advanced more than expected last month as households boosted purchases of motor vehicles and services amid increasing wages. On Monday, the Commerce Department reported consumer spending rose 0.5% in December, following the preceding month's 0.2% rise and surpassing a 0.4% increase forecast. The stronger than expected figure pointed to solid domestic demand that is expected to boost economic growth in early 2017. Data showed purchases of manufactured durable goods climbed 1.4% last month, while consumer spending on services jumped 0.4%.
Meanwhile, personal income increased 0.3% month-over-month in December after rising 0.1% in the prior month. However, economists expected household income to climb 0.4%. Salaries and wages grew 0.4% in December after dropping 0.1% in November. For all of 2016, income climbed 3.5% after increasing 4.4% in 2015. Separately, the Commerce Department said the PCE Price Index advanced 0.2% in December, following November's 0.1% increase. During the twelve-month period ending December, the Index rose 1.6%, the largest increase since September 2014, up from the previous month's 1.4% rise. Excluding volatile items, the Core PCE Index grew 0.1% after being unchanged in November, in line with analysts' expectations.
Relatively uneventful Tuesday
Tuesday is a relatively quiet day in terms of fundamental data, but some data could still have an impact on the USD/JPY pair, for example the Chicago PMI or the US Consumer Confidence. The Chicago PMI captures business conditions across Illinois, Indiana and Michigan states. This index is an indicator of business trends and it is interrelated with the ISM Manufacturing Index. It is widely used to indicate the overall economic condition in the US. Meanwhile, the Consumer Confidence captures the level of confidence that individuals have in economic activity. A high level of consumer confidence stimulates economic expansion, while a low level drives to economic downturn.USD/JPY risks sliding under 113.00
Risk-aversion kept driving the markets yesterday, causing the US Dollar to lose nearly 100 pips against the Yen. The Buck, however, remains on the back foot, risking to post more losses versus the Japanese currency today. The monthly and the weekly S1s could still provide sufficient support in order to avoid this outcome, but that would imply a close in the green zone, with the 114.00 mark being reclaimed again. Ultimately, a drop towards 112.60 is possible, namely a strong psychological support level, which is expected to cause a U-turn if things get out of hand for the Greenback. Meanwhile, technical studies are unable to confirm any scenario, as they keep giving mixed signals.Daily chart
The USD/JPY pair was unable to fully establish the ascending channel pattern on the hourly chart on Monday, having experienced a sharp decline that breach the closest supports. A larger scale down-trend appears to have caused this sell-off, thus, another drop is anticipated once the pair attempts to climb over the 114.70 mark in the upcoming days.
Hourly chart
Market sentiment remains relatively neutral, as 51% of all open positions are short and the other 49% are long. At the same time, the share of purchase orders slid from 59 to 53%.
Right now 52% of OANDA clients are bears, unchanged since Monday. In the meantime, Saxo Bank clients remain on the bullish side, being that 55% of their open positions are now long and the remaining 45% 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 31 and January 31, traders expect the US Dollar to appreciate to 116.43 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 117 yen, which is above the current spot price. The majority of people voted expect the US Dollar to cost somewhere either between 111.00 and 112.50 or between 120.00-121.50 yen in three months, with 12% of the survey participants choosing these trading ranges each. At the same time, the second most popular interval was the 106.50-108.00 one, with 11% of survey participants choosing it.