- The share of buy orders increased from 56 to 58%
- Bulls take up 51% of the market
- Immediate resistance lies at 114.49
- The closest support rests at 114.19
- Upcoming events: US CPI and Core CPI, US Retail Sales and Core Retail Sales, Fed Chair Yellen's Testimony, US Industrial Production, US Capacity Utilization Rate, US Crude Oil Inventories
US producer prices posted the largest increase in more than four years last month amid higher energy-related production costs, official figures revealed on Tuesday. The US Labor Department reported its Producer Price Index advanced 0.6% in January, while market analysts expected the Index to remain unchanged from the previous month at 0.3%. That marked the largest gain since September 2012. However, on an annual basis, producer prices climbed just 1.6% in the first month of 2017, after a similar increase in December.
In the meantime, the so-called core PPI, which excludes volatile items, jumped 0.4% month-over-month in January, compared with analysts' expectations for an unchanged reading of 0.2%. Year-over-year, core producer prices grew 1.6% last month, following December's gain of 1.7% and providing support for the view that the Federal Reserve could raise rates in the upcoming months as promised. Back in December, the Central bank raised its overnight rate to a range of 0.50-0.75% and projected three more rate hikes in 2017. The Federal Reserve Chair Janet Yellen said on Tuesday that the Bank would probably increase rates already at its next policy meeting in March. Following Janet Yellen's comments, the US Dollar hit its three-week high against a basket of currencies, while US government bonds dropped markedly.
US fundamentals in sight
Today focus turns to the US fundamentals, namely the CPI and Retail Sales. The CPI 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. Core CPI, however, excludes volatile products, such as food and energy, in order to capture a more accurate calculation. The Retail Sales measure the total receipt of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. The Core Retail Sales, however, excludes the automobile sector. A number of less important readings are due, such as the Industrial Production. It shows the volume of production of US industries, for example factories and manufacturing. Up-trend is regarded as inflationary, which may anticipate interest rates to rise. The Capacity Utilization Rate could also be worth paying attention to, as it is the percentage of the US production capacity, which is actually used over the short-time period. It is indicative of overall growth and demand in the US economy. A high capacity utilization stimulates inflationary pressures.USD/JPY sets eye on 115.00
The American Dollar managed to erase all intraday losses against the Japanese Yen yesterday and even climb over the 114.00 mark, thus, breaking its seven-week bearish trend. The US Dollar now has the potential to post more gains and reach the 115.00 major level, but a surge beyond this level could be difficult to achieve, as the 55-day SMA, the weekly R2 and the upper Bollinger band form a strong resistance area around 115.15. Technical indicators in the daily timeframe also suggest the Buck could post losses today. Setbacks are now expected until the USD/JPY pair reaches the 21-month bearish trend-line near 118.00.Daily chart
The USD/JPY pair appears to have entered a short-term bullish trend, which could help it reach the 118.00 mark. At the moment there are no obstacles, as the 23.60% Fibo has been pierced yesterday. The 115.00 mark is still the first target, as a tough resistance lies there on the daily chart.
Hourly chart
Bulls are barely outnumbering the bears, taking up 51% of the market (previously 55%). The share of buy orders increased from 56 to 58%.
Right now 56% of OANDA clients are bulls, compared to 51% on Tuesday. 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 January 15 and February 15, traders expect the US Dollar to appreciate to 114.09 yen in three months' time, while the forecast for March 31 was 117.66 yen. It is also worth noticing that 52% of all forecasts fall above 114 yen, which is above the current spot price. The majority of people voted expect the US Dollar to cost somewhere between 106.50 and 108.00 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 115.50-117.00 one, with 14% of survey participants choosing it.